Explain the difference between actual output and potential output. What does the difference between these variables represent?
What will be an ideal response?
Potential output represents the long-run level of output that is potentially achievable if all resources are used to their full utilization. Because potential output is a long-run concept, the difference between actual and potential output represents cyclical, or short-run, deviations in output from what is potentially achievable.
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Even in democratic governments, we tend to have a problem with accountability due to the following reasons, except:
A. So many government activities are undertaken simultaneously B. Civil-service protections apply to many bureaucrats C. The electorate cannot monitor each and every action of the government D. There is the markets' self-correcting mechanism in government
Suppose a government is considering imposing either a tariff or a quota on imported grain, and either policy will result in exactly 750 tons of grain being imported. How do these policies differ?
A. The quota will generate revenue for the firms that hold import licenses, while the tariff will generate revenue for the government. B. Domestic production will be higher with the quota than with the tariff. C. The price of grain under the quota will be higher than the price under the tariff. D. The price of grain under the tariff will be higher than the price under the quota.