Chapter 24: Q. 10 (page 655)
The fact that it takes a long time for firms to get new plants and equipment up and running is an illustration of what policy problem?
The policy problem is that if there will be any change in the policies then it will take time to get its real impact on economy.
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In what way is a permanent negative supply shock worse than a temporary negative supply shock?
Use a graph of aggregate demand and supply to demonstrate how lags in the policy process can result in undesirable fluctuations in output and inflation.
Why does the divine coincidence simplify the job of policymakers?
In the United States, many observers have commented in recent years on the “political gridlock in Washington D.C.” and referred to Congress as a “Do Nothing Congress.” What type of policy lag is this describing?
If an economy’s self-correcting mechanism works slowly, should the government necessarily pursue an activist policy to eliminate unemployment? Why or why not?
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