Suppose the economy is suffering in a recessionary period. Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead. What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?
The Keynesian view of the economy would conclude that the economy would remain in a recession and would not automatically correct itself. In fact, the economy may fall further into recession if businesses cut investment and consumers continue to increase saving, thus cutting consumption spending. Apart from a significant fall in the price level, no automatic forces exist to pump up the economy toward full employment in the short run.
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The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external ________ of ________ per ton
A) benefit; $200 B) benefit; $100 C) cost; $200 D) cost; $100
Economists have used ________ and ________ in experiments designed to determine whether consumers care about fairness when they make decisions
A) Giffen goods; luxury goods B) the income effect; the substitution effect C) the ultimatum game; the dictator game D) network externalities; the endowment effect