Author Question: If there are significant external benefits associated with the consumption of a product, it can be ... (Read 15 times)

ts19998 · **on:** Jun 30, 2018

If there are significant external benefits associated with the consumption of a product, it can be said that the private benefit to the consumer ____ the relative importance of this product to society and output should ____ to move toward the efficient situation.
a. overstates; increase
b. understates; increase
c. overstates; decrease
d. understates; decrease

Question 2

With rational expectations, a policy that would decrease AD would lead to:
a. lower inflation and lower unemployment in the short run if people underestimated the effect of the policy on inflation.
b. lower inflation and higher unemployment in the short run if people underestimated the effect of the policy on inflation.
c. lower inflation and an indeterminate effect on unemployment in the short run, if people's expectations were correct.
d. both (b) and (c).