Policy Makers Cannot Achieve Both Price Stability and Economic Activity

question 28

Multiple Choice

Policy makers cannot achieve both price stability and economic activity stability when facing

• A)temporary supply shocks.
• B)permanent supply shocks.
• C)demand shocks.
• D)all of the above.

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Definitions:

Economies of Scale

The cost advantage achieved by businesses when production becomes efficient, as the scale of operation increases leading to a reduction in average costs.

Positive Economic Profits

Earnings that exceed the total costs, including both the explicit and implicit costs of a business.

Expand

To increase the scale, scope, or size of something, often used in the context of business growth or economic expansion.

Increasing-cost Industry

An industry in which production costs increase as output expands, often due to scarce resources or rising input prices.