To Stabilize the Economy, Monetarists and Rational-Expectations Economists

question 115

Multiple Choice

To stabilize the economy, monetarists and rational-expectations economists:

• A) Would like a monetary rule to be adopted
• B) Would like to see coordination failures eliminated
• C) Recommend the use of discretionary fiscal policy
• D) Recommend the use of discretionary monetary policy

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Definitions:

Minimum Efficient Scale

The smallest level of production at which long-run total average costs are minimized.

Diseconomies of Scale

A situation where a company or organization grows so large that the costs per unit increase, leading to reduced efficiency.

Long-run Average Total Cost

Represents the average cost per unit of output in the long-term, where all inputs are variable, allowing for the adjustment of all factors of production.

Minimum Efficient Scale

The smallest amount of production a company can achieve while still taking full advantage of economies of scale in terms of lowering the average cost per unit.