Liberals Argue Against the Conservative "Monetarist" Program to Control Inflation

question 5

Multiple Choice

Liberals argue against the Conservative "monetarist" program to control inflation because

• A) the relationship between output, employment, and money supply growth is not stable and predictable.
• B) a fixed money supply growth rule prevents government and monetary authorities from accommodating the vagaries of each business cycle.
• C) structural factors such as technological change, global competition, and income inequality have restrained and/or depressed labor costs.
• D) All of the above.

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Definitions:

Marginal Cost

The price rise from the production of an additional unit of a product or service.

Diminishing Returns

A principle stating that as one input in the production process is incrementally increased, there will be a point at which the added output from each additional unit of input will start to decrease.

Diseconomies of Scale

This phenomenon occurs when a firm's production costs per unit increase as it produces more, due to inefficiencies that arise from scaling up operations.

Economic Profit

The economic result derived from subtracting a business's entire expenses, both explicit and implicit, from its total incoming funds.