The Advantage of Government Intervention When a Shock Hits an Economy

question 5

Multiple Choice

The advantage of government intervention when a shock hits an economy is

• A) the real interest rate rises.
• B) the price level rises.
• C) the real interest rate remains unchanged.
• D) an efficient outcome is achieved faster.
• E) the composition of output changes.

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Definitions:

Unionism

The principles, practices, or the system of forming and belonging to a labor union to protect and further the rights and interests of workers.

Normal Profit

The payment made by a firm to obtain and retain entrepreneurial ability; the minimum income that entrepreneurial ability must receive to induce entrepreneurs to provide their entrepreneurial ability to a firm; the level of accounting profit at which a firm generates an economic profit of zero after paying for entrepreneurial ability.

Entrepreneurial Talent

The unique skills and abilities possessed by individuals that enable them to innovate, start new businesses, and drive economic growth.

Business Cycle

Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases.