Monetary policy involves changes in the nation's money supply and interest rates by the Federal Reserve. Economists differ in their views of the effectiveness of monetary and fiscal policy. C. Economic Efficiency 1. Allocative efficiency achieves the largest possible output of goods and services from the existing stock of resources and technology. A dynamically efficient economy finds the lowest-cost organizational structure to achieve technological change and product improvements.
Allocative efficiency occurs when marginal social benefits are equal to marginal social costs.
An amount less than the allocatively efficient amount is produced. An amount less than the allocatively efficient amount is produced. An amount greater than the allocatively efficient amount is produced. D. Distributional Equity 1. The distribution of income in the United States is relatively unequal.