According to some economists, what contributed to the unusual uncertainty that adversely affected aggregate supply during the recovery following the recession of 2007-2009?
What will be an ideal response?
Given that the financial crisis and recession of 2007-2009 were more severe than any since World War II, an increased level of uncertainty was unavoidable. But in 2010, additional sources of uncertainty might have caused some firms to produce less output and hire fewer workers than they would have otherwise. Owners of some small and medium-sized businesses were concerned that the Affordable Care act increased the cost of hiring workers. In mid-to-late 2010, there was also concern that Congress might allow tax reductions passed during 2001 and 2003 to expire. Finally, many small to medium-sized businesses found that they were unable to secure bank loans to expand their businesses.
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Discretionary fiscal policy:
What will be an ideal response?
Suppose all prices increase by 10 percent in the year while the total sales of HDTVs remain constant. This is
A) a violation of the law of demand since fewer HDTVs should be purchased at a higher price. B) a violation of the law of demand since more HDTVs should have been purchased with higher incomes. C) not a violation of the law of demand since the relative price of HDTVs did not change. D) not a violation of the law of demand since the law of demand does not apply to expensive goods like HDTVs.