The Cost of Wasted Capacity Is

question 34

Multiple Choice

The cost of wasted capacity is

• A)the reduction in margin that results from having to go to a backup source.
• B)the margin that would have been generated if the capacity had been used for production.
• C)the productivity increase generated when the capacity is used for production.
• D)the sales potential of excess capacity kept in reserve for emergency production.

Understand the concepts of policy lags and their types (decision-making lag, implementation lag, effectiveness lag, and recognition lag) in macroeconomic policy.

Distinguish between active and passive policy approaches and their implications on the economy.

Realize the impact of macroeconomic policies (fiscal and monetary) on aggregate demand and aggregate supply.

Comprehend the role and critiques of discretionary fiscal policy in stabilizing the economy.

---

Definitions:

Empirical Approach

A method of inquiry based on observation or experience rather than theory or pure logic, often involving the collection and analysis of data.

Scientific Observations

Careful and systematic recording of phenomena or experimental results in the context of scientific research.

Accept on Faith

The act of believing in something without requiring empirical evidence or proof.

Empiricism

A philosophical theory or approach emphasizing the importance of observation and experiment in the acquisition of knowledge.