6. Given the following hypothetical example, complete the computations. Given: MPC=0.8, required reserve ratio is 10%, How large would each policy have to be to achieve the following: A. A spending decrease of $100b - how large would the change in government spending need to be? work below) - and would it be expansionary or contractionary fiscal policy? B. A spending decrease of $100b- how large would the change in taxes need to be (show your work below). and would it be a tax increase or a tax decrease?. C. A decrease in the money supply of $100b- how much would the Fed have to inject into banks? work) à (show your (show your

6. Given the following hypothetical example, complete the computations. Given: MPC=0.8, required reserve ratio is 10%, How large would each policy have to be to achieve the following: A. A spending decrease of $100b - how large would the change in government spending need to be? work below) - and would it be expansionary or contractionary fiscal policy? B. A spending decrease of $100b- how large would the change in taxes need to be (show your work below). and would it be a tax increase or a tax decrease?. C. A decrease in the money supply of $100b- how much would the Fed have to inject into banks? work) à (show your (show your

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 15P

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3)Show and explain how an expansionary fiscal policy can cause crowding-out effect by using aggregateexpenditure and aggregate output curves.2)What action could the TCMB take to reduce the crowding-out effect of an expansionary fiscal policy?1)By using graphs, show and explain the effects of an expansionary fiscal policy on the goods market by taking thelink between two markets into account
13. Suppose that two countries differ on in the size of their MPC, where the MPC is high in country A and low in country B. Draw IS/LM and AD/AS curves for each country. In which country will monetary policy be most effective at changing income? Fiscal policy?
7 - If the government announces that it has increased the corporate tax rate from 25% to 35% and the income tax rate from 20% to 30%, what kind of policy will it follow?A) contractionary fiscal policyB) Supply-side policyC) contractionary monetary policyD) Expansionary monetary policyE) Expansionary fiscal policy
Let’s assume that in 2017, Sweden’s government had no debt and held $120 billion dollars. To stimulate its economy during 2018, the government of Sweden decides to spend $65 billion more than it will receive in tax revenue and in 2019, the government of Sweden’s expenditures will exceed tax revenues by $75 billion. What will the government of Sweden’s total debt equal at the end of 2019? Group of answer choices $20 billion $120 billion $140 billion $260 billion
2. Assume MPC = 0.9. Government increased its spending by 100. 2.a. How much would this increase the GDP immediately?(here, no consideration of the multiplier effect nor the crowding-out effect) Considering the multiplier effect but not the crowding output effect, how much would be the eventual increase in GDP through the multiplier effect?2.b. How the changes in 2.a. affect the money demand: Decrease, Increase, or No change? How would the equilibrium interest rate change: Decrease, Increase, or No change? 2.c. Now, consider the crowding-out effect. How would the crowding-out effect change the immediate increase in 2.a.: Decrease, Increase or No change? How would the crowding-out effect change the eventual increase in GDP in 2.a.: Decease, Increase, or No change?
One of the main arguments against using Fiscal Policy is the crowding out effect. Suppose the government uses government purchases to stimulate the economy. Explain quantitative easing? If the Fed’s current policy is quantitative easing, do you think that there is a danger of the government’s current fiscal policy being crowded out? Why or Why not? Explanation required.
An economy is currently in a recession. Assume the government budget is balanced. In the absence of any discretionary policy action, will the government budget move into surplus, deficit, or remain in balance? Explain. (e) On your graph in part (a), show how the economy will adjust in the long run in the absence of any discretionary policy action. (f) Now assume instead the government increases spending without changing taxes to close the recessionary gap. What effect will this policy have on the national debt? (g) Draw a correctly labeled graph of the loanable funds market and show the effect of the change in the national debt on the equilibrium real interest rate. (h) Based on the change in the equilibrium real interest rate identified in part (g), what will happen to economic growth in the country in the long run? E
Given the following information. C = 100 + 0.75Yd , (dengan, Yd = Y − T) I = 240 − 600r G = 50 T = 30 Derive the equation for IS curve. Calculate the equilibrium level of income if the interest rate is 8 percent. What is the impact on the equilibrium level of income if the government runs an expansionary fiscal policy by adding G by 200 units? What is the impact on the IS curve if the government increases tax to 80 units? What are the factors other than the fiscal policy factors that can cause the IS curve to shift?
1. If NX=0, then savings must be equal to invesment Select one: True False 2. When the government runs a fiscal deficit, it finances it by: a. issuing stocks b. decreasing taxes c. borrowing money from a commercial bank d. issuing bonds 3. If taxes increase, then: a. disposable income decreases b. disposable income increases c. consumption increases d. private savings increase 4. Primary fiscal surplus refers to: a. private savings b. total savings c. public savings d. trade balance 5. Calculate Private Savings using the proper information below: Private Consumption=€12,000 Public Spending=€5,000 Taxes= €7,000 GDP=€30,000 Investment=€13,000 6. When the interest rate falls: a. the cost of borrowing money increases b. investment decreases c. investment increases d. savings increase 7. When the government runs a fiscal deficit and as a result private investment falls, this is called: 8. An economy has the following…
Suppose the government undertook a fiscal policy by increasing government expenditure by 20 percent. Clearly demonstrate how this would result in the crowding out phenomena.c. Suppose the instead of fiscal policy, the government, through its monetary authority undertook an expansionary monetary policy by increasing nominal money supply by 20 percent. Clearly demonstrate how this would result in the crowding in phenomena.
1. What is the difference between what Supply Side economists expect to happen when taxes are cut and what Keynesian and other economists expect to happen when taxes are cut? (Explain in turn which curve Supply Siders expect to shift and which way,, and which curve Keynesians expect to shift, and which way.) 2. A. What are two examples of "automatic stabilizers" that might kick in during a recession to reduce the size of the downturn? B. Which component of Aggregate Demand (C, I, G, or X-M?) do automatic stabilizers affect? 3. What is the difference between a government budget deficit and the national debt?
6. a) If US money supply in the beginning of the year is $1148 billion. Suppose the FedBank has decided to raise the reserve ration from 10 percent to 11 percent. How itwould affect the money supply? b) If tax multiplier is -2, what is the government spending multiplier? c) In order to increase equilibrium income, either the government can increasegovernment spending or may go for tax cut? What would you suggest and why?