In what sense is "austerity" an inevitable result of structural adjustment?
What will be an ideal response?
Adjustment brings expenditure reduction and expenditure switching. Expenditure reduction means that government programs are likely to be cut back. Expenditure switching moves resources from production of domestic goods to production of goods for export. Both local demand and supply will drop, causing higher unemployment and lower incomes. Devaluation may also bring inflation, cutting into real incomes.
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In the above figure, what are the long-run equilibrium price level and real GDP?
A) 130 and $11.5 trillion B) 120 and $11.5 trillion C) 120 and $12 trillion D) 130 and $12 trillion
In an economy without government or a foreign sector the equilibrium level of output occurs when
A) actual saving equals actual investment. B) actual saving equals desired investment. C) desired saving equals desired investment. D) desired saving equals actual investment.