Explain why expenditure switching and expenditure reducing policies need to be used together
What will be an ideal response?
Policies that switch spending to domestic goods drive up aggregate demand, which is inflationary unless the economy is in the horizontal part of the aggregate supply curve. Expenditure reductions on their own are recessionary because they reduce aggregate demand without switching the composition of demand toward domestic producers. Thus to be successful, the policies must be used together.
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Physical capital is:
A. the talents, training, and education of workers. B. the physical labor of workers. C. the financial resources available for investment. D. the factories and machinery used to produce other goods and services.
Refer to Figure 4-12 which shows the market for vitamins. Suppose the government imposes a price ceiling of Pv. How will the price ceiling affect the quantity supplied, quantity demanded, and quantity exchanged?
What will be an ideal response?
A sequential game can be used to analyze whether a retail firm should build a large store or a small store in a city, when the correct choice depends on whether a competing firm will build a new store in the same city. Which of the following is used to analyze this type of decision?
A) an either-or graph B) a decision tree C) a decision matrix D) a sequential matrix
If marginal product rises, then marginal costs rise
Indicate whether the statement is true or false