Markets Are Always Able to Find Solutions to Externality Problems

question 65

True/False

Markets are always able to find solutions to externality problems and thus maximize social surplus.

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Definitions:

Sacrifice Ratio

The measure of economic costs associated with reducing inflation through monetary policies, typically represented as the loss in output per percentage point decrease in inflation.

Inflation Expectations

The rate at which consumers, businesses, and investors expect prices to rise in the future.

Phillips Curve

A macroeconomic theory that suggests unemployment and inflation have a stable and inverse relationship, indicating trade-offs short-term policy-making.

Disinflation

A reduction in the rate of inflation, indicating a slowdown in the rate at which prices are rising.