Author Question: The market is not a self-regulating mechanism because prices are not flexible and nothing ensures ... (Read 73 times)

j.rubin · **on:** Jun 30, 2018

The market is not a self-regulating mechanism because prices are not flexible and nothing ensures that planned leakages will be offset by planned injections. To bring the economy out of depression and end high unemployment, some way of stimulating aggregate demand is required. This can be best achieved by a combination of government deficit spending and regulation of tax rates.. Which school of thought does this statement best represent?
a. Utopian economics
b. Monetarist economics
c. Classical economics
d. Keynesian economics
e. Marxist economics

Question 2

A subsidy to wheat farmers reduces the price of a bushel of wheat from 2.50 to 2 per bushel. The equilibrium quantity of wheat sold prior to the subsidy was equal to 200,000 bushels. Predict the new equilibrium quantity of wheat after the imposition of the subsidy given that the demand for wheat is known to be unit elastic.
a. 100,000 bushels
b. 200,000 bushels
c. 250,000 bushels
d. 400,000 bushels