Question

1) Bottleneck effect is related to what type of inflation?

Cost-push.

Demand-pull.

Structural.

Social.

2) Adam smith would disagree with which of the following

a)The principles of economics are embodied in natural law

b)It is always in best interests of a nation to protect domestic industries

c)Governments should engage in public works projects necessary to society

d)Self interest will promote maximum utilization of resources

3) Theory in economics

a) is of no use because it is abstract whereas true economic reality is concrete

b) is useful because it takes account of all the complexities of reality

c) is useful even though it simplifies reality

d) is all right in theory but not in practice

e)is worthwhile solely because it is elegant and elegantly beautiful

Answer 1

Answer-1

Cost push inflation

Cost-Push inflation refers to the prices of goods and services increases because of an increase in the cost of wages and raw materials. The bottlenecks include the fluctuations in the prices of agricultural products, the weak infrastructure of the economy will lead to the cost-push inflation

Answer-2

Government should engage in public works projects necessary to society

Adam Smith disagrees the involvement of government in economic activity. He gave much importance to self-correction of the economy called laissez-faire.

Answer-3

is useful even though it simplifies reality

Economic theory is useful because it simplifies the realities.