Markets and the economy


1. Explain how an increased federal budget deficit resulting from a recession can actually help stabilize an economy.

2. Describe how adjustments in wages and prices take the economy from the short-run equilibrium to the long-run equilibrium.

3. Explain why a system of marketable pollution permits leads to less costly pollution abatement and a higher concentration of polluted areas than a command-and-control system.

4. Although GDP per capita is the most commonly used measure of a country's success, many economists believe it does not give an accurate measure of a nation's economic well-being. Some studies have concluded that that GDP is not the best measure of well-being, and although it may be the best available on a timely basis, other factors need to be considered in addition to GDP to give a more accurate picture of economic well-being and the disparity of well-being between nations.

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Microeconomics: Markets and the economy
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