(Last Word) In response to the Great Recession, the federal government engaged in significant deficit-funded spending, but it did not fully achieve the desired result. Which of the following best explains why the fiscal policy actions fell short of their
objective?
A. Monetary policy counteracted fiscal policy, keeping the unemployment rate from falling as
much as intended.
B. Consumers did not respond to the fiscal stimulus as well as hoped, as they put more
income into saving and repaying debt.
C. Although the fiscal stimulus increased consumer spending significantly, it mostly went to
purchase foreign-produced goods and services.
D. The fiscal stimulus caused massive inflation that further disrupted economic activity.
B. Consumers did not respond to the fiscal stimulus as well as hoped, as they put more
income into saving and repaying debt.
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In the figure above, the curve that shows the diminishing marginal utility is
A) total utility curve A because it gets steeper as consumption of tomatoes increases. B) total utility curve A because it is higher than total utility curves B or C. C) total utility curve C because it gets flatter as consumption of tomatoes increases. D) total utility curve C because it is lower than total utility curves B and C.
Why is it not a contradiction to say that a firm is simultaneously earning an accounting profit but suffering an economic loss?
What will be an ideal response?