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Author Question: An economy produces at point a on the PPF shown in the above figure. A drought reduces the amount of ... (Read 159 times)

Shelles

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on: Jun 29, 2018
An economy produces at point a on the PPF shown in the above figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat ________.
 
  A) remains the same
  B) increases
  C) is impossible to calculate without numbers on the axes
  D) decreases

Question 2

Compare the policy prescriptions of Keynesian, Classical, and Monetarist economists.
 
  What will be an ideal response?


Jevvish

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Reply #1 on: Jun 29, 2018
Answer to Question 1

B

Answer to Question 2

Keynesians believe that without assistance the economy would almost never be at full employment. They prescribe activist fiscal and monetary policy to drive the economy to full employment. Classical economists believe the economy is self-regulating and will always tend towards full employment. Their main policy initiatives center on removing tax created disincentives for growth. Monetarists call for low taxes and consistent money growth because Monetarists believe that recessions are the result of fluctuations in the quantity of money.


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