The limitations on purely voluntary exchange created by positive externalities
Answer: Function also to distort the actions of government
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On the graph above, consider a point A on the aggregate supply curve and above the aggregate demand curve. At this point, ________
A) quantity demanded equals output, but the inflation rate will fall, so output will rise B) quantity demanded is greater than quantity supplied, so the inflation rate will rise C) output is greater than the quantity demanded, so output will fall D) the aggregate demand curve will shift to the right until quantity demanded is equal to quantity supplied E) none of the above
A monopolistically competitive market
a. usually has too many firms, reducing the economic profit of each firm to zero. b. usually has too few firms, reducing the product variety for consumers. c. may have too many or too few firms, and the government can intervene to achieve the optimal number of firms. d. may have too many or too few firms, but the government can do little to rectify the situation.
Traditional models see no role for the government in pushing individuals toward the preferred equilibrium.
Answer the following statement true (T) or false (F)
The Fed’s quick response to the threat to the economy after September 11, 2001, makes a strong case for
A. a rules-based monetary policy regime. B. a discretionary-based monetary policy regime. C. the superiority of fiscal policy. D. the dominant role of Congress in activist policy.