All of the following are macro failures that justify government intervention except for
Multiple Choice
a rising price level.
inequitable distribution of output.
high unemployment.
a decline in the production capacity.
a rising price level.
The correct answer is:
a rising price level.
Government intervention is generally justified in macroeconomics when there is an inequitable distribution of output, high unemployment, or a decline in the production capacity. However, a rising price level is typically considered a result of inflation, which can sometimes be addressed through monetary policy without direct government intervention.
To determine which of the options is NOT a macro failure that justifies government intervention, we need to understand what each of these factors represents.
1) Rising price level: When the overall prices of goods and services in an economy increase over time, it is known as inflation. Inflation can have negative consequences, such as eroding purchasing power and distorting resource allocation, which may warrant government intervention.
2) Inequitable distribution of output: This refers to a situation where the benefits of economic growth or production are not distributed fairly among different groups within society. If there is significant inequality, with some groups benefiting greatly while others struggling, it may be seen as a macro failure that justifies government intervention.
3) High unemployment: Unemployment is a macroeconomic concern when a substantial number of individuals in an economy are without jobs and seeking employment. High unemployment levels can lead to decreased consumer spending, reduced economic output, and social instability. Therefore, it can be considered a macro failure that may require government intervention.
4) Decline in the production capacity: A decline in the production capacity signifies a reduction in an economy's ability to produce goods and services efficiently. This can result from factors such as inadequate investment, decreased technological advancements, or external shocks. A decline in production capacity is also considered a macro failure that may necessitate government intervention.
Based on the above analysis, the answer is: a rising price level. While inflation is a concern that may warrant government intervention, it is not typically seen as a failure that justifies intervention. Rather, it is often managed through monetary policy by central banks.