Which of the following is not a valid criticism of discretionary fiscal policy?
a. The implementation of fiscal policy is sometimes difficult
b. Time lags in fiscal policy are long.
c. Fiscal policy works only during periods of stagflation.
d. Fiscal policy often affects only current income, but many economic decisions are made on the basis of permanent income.
e. Fiscal policy might have undesirable long-term effects on aggregate supply.
c
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Define "externality." Give an example of an external cost. Explain why resources will not be allocated efficiently if externalities are present. How can the problem of externalities be addressed?
What will be an ideal response?
If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?
A) Demand and supply will both increase. B) Demand will increase, but these two factors will not shift the supply curve. C) Supply will increase, but these two factors will not shift the demand curve. D) Demand will increase and supply will decrease.