In the First Half of 2008, Food and Energy Costs

question 38

Multiple Choice

In the first half of 2008, food and energy costs in the United States increased. At the same time, the financial crisis slowed production as firms predicted lower profits. A ___________ macroeconomist would support the use of ___________ .

• A) classical; taxes to push the economy back to full employment
• B) Keynesian; technology to push the economy back to full employment
• C) Keynesian; fiscal or monetary policy to stimulate aggregate demand
• D) classical; monetary policy to stimulate aggregate demand

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Definitions:

Market Demand

The total quantity of a good or service that all consumers in a market are willing and able to purchase at various prices.

Market Supply

The total quantity of a good or service available for purchase at any given price level in a given market.

Price Floor

A government or regulatory-imposed minimum price set above the equilibrium price, preventing the market price from falling below it.

Total Welfare

The total economic well-being that a society achieves, including both consumer surplus and producer surplus.