According to our basic analysis, the cure for inflation should be fairly straightforward. If the problem is too much aggregate demand
What will be an ideal response?
the solution is to reduce aggregate demand. We could do this by reversing the process discussed in the previous section and lowering government spending on goods and services. A similar effect can be obtained by reducing transfer payments or by increasing taxes. With lower transfer payments or higher taxes, businesses and consumers will have less spending power. Lower spending by government, businesses, and consumers will result in a lower equilibrium output level, and there will no longer be excess demand pressures to create inflation
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Your textbook asserts that the federal government's $787 billion stimulus plan, launched in 2009,
A) failed to stimulate the economy out of the Great Recession. B) was followed by growing unemployment. C) stifled the corrective process of the previous cluster of errors during the housing bubble. D) favored well-organized interests. E) led to all of the above.
Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination) and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination)
If trade occurs between these two countries, which should produce more food and which more clothing?