Supply-Side Policies Are an Ineffective Way to Deal with Inflation

question 25

Multiple Choice

Supply-side policies are an ineffective way to deal with inflation because:

• A) it is difficult to increase the growth rate in aggregate supply.
• B) supply-side policies can cause aggregate demand to decrease.
• C) supply-side policies work so rapidly that they can cause a demand shock.
• D) increases in aggregate supply are accompanied by decreases in employment.

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Definitions:

Inefficient Use

Utilization of resources in a way that is not optimal or does not maximize the potential outcome or benefit.

Economies of Scale

The economic benefits that companies gain from their size of operations, usually with the expense for each produced unit going down as the production volume goes up because fixed expenses are distributed across a larger number of units.

Range of Output

The spectrum of production output levels within a manufacturing or production process, from minimum to maximum, based on capacity, demand, and resource availability.