Q1. If the AD shortfall is $800 billion and the MPC is 0.8,
a) Explain how large is the desired fiscal stimulus?
b) Explain how large an income tax cut is needed?
c) Alternatively, Explain how more more government spending would achieve the target?
Q2. Which characteristic of competitive markets permits society to answer the illustrate what to create question efficiently?
Q3. The basic model of pure competition reviewed in this chapter finds that in the long run all firms in a purely competitive industry will earn normal profits. If all firms will only earn a normal profit in the long run, why would any firms bother to develop new products or lower-cost production methods? Elucidate.