How might long policy lags impact the divine coincidence?
What will be an ideal response?
The divine coincidence applies when policy makers are able to respond to a single shock at a time. If shocks occur at a faster pace than policies can be implemented, then policies may be destabilizing. The argument that the economy's self-correcting mechanism is too slow cannot justify policies that, in practice, are even slower.
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Price elasticities of supply are always:
a. the same as price elasticities of demand. b. negative numbers. c. positive numbers. d. greater than one. e. increased when a tax is imposed.
A good is said to be a normal good when
a. decreases in income lead to an increase in demand for the good b. decreases in income lead to a decrease in demand for the good c. increases in income lead to a decrease in demand for the good d. increases in price lead to a decrease in the quantity demanded of the good e. increases in price lead to a decrease in demand for the good