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Government benefits from inflation
What are government's fiscal policy options for ending severe demand-pull inflation? Use the aggregate demand-aggregate supply model to show the impact of these policies on the price level. Which of these fiscal policy options do you think might be favored by a person who wants to preserve the size of government? A person who thinks the public sector is too large?
Explain why relatively flat as opposite relatively steep labor demand curves are more consistent with the empirical observation that there are relatively minor changes in the real wage rate over the course of the business cycle.
Is sustainable long-run equilibrium always reached when the AD and SAS curves intersect? Why or why not?
If the equilibrium real wage remains constant, what happens to the nominal wage when the actual inflation rate exceeds the expected inflation rate?
"In the steady state, the government benefits from inflation." Explain.
Explain carefully in terms of production theory why it might be that no amount of "cracking down" can increase worker productivity at CF&D.
Political business cycle: Do economic events affect presidential elections? To test this so-called political business cycle theory, Gary Smith 20 obtained the following regression results based on the U.S Presidential elections for the four yearl..
Draw a graph of the market for banana. What are the equilibrium price and quantity? Explain why. If the price of banana was $1.50 a box. What would be the situation in the banana market (shortage or surplus)? Explain why and how the price and quanti..
Assume that the following information about the economy is correct. The potential GDP is 3 percent. Real GDP has fallen at a minus two percent rate in the last 12 months.
Suppose that a chair manufacturer is producing in the short run (with its existing plant and equipment). The manufacturer has observed the following levels of production corresponding to different numbers of workers:
Suppose the level of autonomous expenditure, which we could call A, rises by AA. What is the effect on the level of equilibrium national income?
hat is your expected utility without insurance? Suppose you can buy insurance that will cover the medical expenses but not the foregone part of your salary. How much is an actuarially fair policy, and what is your expected utility if you buy it?
Explain how the Central Bank can set the nominal interest rate in the money market. In addition, explain how it can use expansionary monetary policy to boost GDP if the economy is in a recession.
Consumption accounts for about 60% of GDP, while investments accounts for about 20% for GDP. But many economists think that, to understand economic recession, it is more significant to look at investment than consumption. Why?
Utilize an elasticity concept to elucidate each of the following observations.
Providing the current situation with General Motors, our team is recommending that they (GM) reduce their current operations in order to maximize profits.
Suppose a monopolistic competitor in long-run equilibrium has a constant marginal cost of $6 and faces the demand curve given in the following table:
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