What problems does a command economy face when it tries to determine what to produce for the economy?
What will be an ideal response?
The biggest difficulty that a command economy faces in determining which goods to produce is the fact that there are no prices in the economy which signal which goods and services are more highly valued than others. As a consequence since the decision to produce is often centralized either too little of some products are produced or too much is produced.
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If expectations are adaptive, how will the economy adjust to a new long-run equilibrium in response to expansionary monetary policy? Support your answer with a graph of the Phillips curve
What will be an ideal response?
A forecaster used the regression equationQt = a + bt + c1D1 + c2D2 + c3D3and quarterly sales data for 1996 I - 2013 IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1, D2 and D3 are dummy variables for quarters I, II, and III.
What is the estimated intercept of the trend line in the fourth quarter?
A. 0 B. 55 C. 40 D. 70 E. none of the above