Economic policy tool—contractionary fiscal policy. This is a weapon that can be used against inflation, though it would generally be unwise to use it at times of high unemployment
What will be an ideal response?
(The problem of what to do if unemployment and inflation occur at the same time—something that is not shown in our simple model—is discussed in Chapter 13.) Of course, too large a spending reduction could overshoot in a downward direction, leading to excessive unemployment and, possibly, a recession
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The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation
A) Fisher equation B) Keynesian equation C) Monetarist equation D) Marshall equation
In the inverted-U theory of R&D:
A. process innovation and product innovation are inversely related. B. technological change is inversely related to scientific discovery. C. R&D expenditures rise continuously as a percentage of firms' sales as industry concentration rises. D. R&D expenditures first rise as a percentage of firms' sales as industry concentration increases, but then fall as higher industry concentration occurs.