How might long policy lags impact the divine coincidence?
What will be an ideal response?
The divine coincidence applies when policy makers are able to respond to a single shock at a time. If shocks occur at a faster pace than policies can be implemented, then policies may be destabilizing. The argument that the economy's self-correcting mechanism is too slow cannot justify policies that, in practice, are even slower.
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Using the table above, and assuming no bequest, what amount of consumption is chosen in period 1, if the consumer wants consumption in the two periods to be equal?
If initial wealth is $40,000, what amount of consumption is equal over the two periods?
Why would we be likely to observe dentists engaging in price discrimination?
a. Dental care is expensive. b. All dentists are basically alike. c. It is very important to exercise care in choosing a dentist. d. It is nearly impossible to resell the services of a dentist. e. The demand for dentists is very inelastic.
The Lorenz curve measures the:
a. distribution of income. b. effectiveness of government transfer payments. c. extent to which family incomes are affected by welfare. d. all of these.
Taken as a whole the balance of payments:
a. Is usually positive when a nation is healthy and negative when it is weak. b. Is usually negative when the nation is healthy and positive when it is weak. c. Must equal zero. d. Must equal GDP minus personal consumption expenditures. e. Can be positive or negative. It does not depend on the health of the country.