Other things constant, what is the outcome of expansionary fiscal policies on employment, inflation, real output, and deficits in the short-run?
The expansionary policy will lead to an increase in AD which will lead to an increase in real output, a decrease in unemployment, and an increase in inflation. Ceteris paribus, the increase in government purchases and/or decrease in taxes will lead to an increase in the deficit.
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What is the effect of important restrictions on prices?
a) they cause prices to drop b) they cause prices to rise c) they often cause prices to rise steeply and then drop d) they usually do not have any lasting effect on price
Internalizing an externality makes _____
a. consumers pay a price that is equal to their private willingness to pay b. producers charge a price that is equal to the marginal cost of production faced by them c. the government tax a third party who has been affected by the externality d. market participants consider the costs of or benefits to other parties while making decisions