If the Government Does Not React to a Recession

question 154

Multiple Choice

If the government does not react to a recession:

• A) the economy will remain out of its long-run equilibrium indefinitely.
• B) the economy will recover, but much more slowly.
• C) voters and consumers are likely to be happy with less government interference.
• D) the government generally doesn't engage in any policy during a recession.

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Definitions:

Variable Costs

These are expenses that vary directly with changes in production volume or activity level.

Relevant Costs

Costs that should be considered when making a decision because they will be affected by the decision; these costs are future-oriented and differ among alternatives.

Sunk Costs

Costs that have already been incurred and cannot be recovered or altered by any current or future actions.

Unproductive

Refers to resources or activities that do not contribute to the output or efficiency of a process or operation.