Explanation

• If fiscal policy is trying to promote stability and economic growth through tax cuts, it is using expansionary fiscal policy.
• Expansionary fiscal policy involves increasing government spending and/or reducing taxes to stimulate economic growth and boost aggregate demand.

Explanation

• If the elasticity of demand for a product is -0.5, this means that demand is inelastic.
• Inelastic demand indicates that a percentage change in price leads to a smaller percentage change in quantity demanded.
• Specifically, a demand elasticity coefficient between 0 and -1 signifies inelastic demand.

Explanation

• Inferior goods are the goods which have negative income elasticity.
• This means that as income increases, the quantity demanded for inferior goods decreases.

Explanation

• The term "crowding out" refers to the decrease in private investment that occurs when government borrowing increases.
• When the government borrows more money from the financial markets to finance its spending, it increases the demand for loanable funds, leading to higher interest rates.
• Higher interest rates make borrowing more expensive for businesses and individuals, reducing their willingness to invest and borrow for private investment projects.
• This phenomenon is known as "crowding out" because government borrowing "crowds out" private investment by competing for available funds in the financial markets.
  

Explanation

At any level of output where the short-run average cost curve is tangent to the long-run average cost curve, the long-run marginal cost (LMC) is equal to the short-run marginal cost (SMC).

Explanation

• A profit-maximizing firm will hire more labor up to the point where the marginal revenue product (MRP) of labor equals the marginal factor cost (MFC) of labor, which is the wage rate. This is known as the point of equilibrium in the labor market.
• The MRP of labor is the additional revenue generated by the last unit of labor hired, and the MFC is the additional cost of hiring that unit of labor. When MRP = MFC, the firm has maximized its profits.

Explanation

Given own price elasticity equal to -2.5 implies that if the price of the good increases by Rs. 10, then the quantity demanded of the good Will decrease by 25% of initial quantity.

Explanation

• In monopolistic competition, long-run equilibrium involves zero economic profit.
• Firms in monopolistic competition have some degree of market power, allowing them to differentiate their products.

Explanation

The correct option that could cause the aggregate demand curve to shift to the left is "Contractionary demand management policies."