a) Explain whether a contractionary or an expansionary fiscal or monetary policy should be implemented in 2021. b) Based on you answer to part a) above, identity one monetary and fiscal policy instrument. c) If the economy is successful in keeping real GDP at its potential level in 2021, state whether each of the following will be higher, lower, or the same if this economy had taken no action. i Real GDP ii Potential GDP iii The inflation rate iv The unemployment rate
a) Explain whether a contractionary or an expansionary fiscal or monetary policy should be implemented in 2021. b) Based on you answer to part a) above, identity one monetary and fiscal policy instrument. c) If the economy is successful in keeping real GDP at its potential level in 2021, state whether each of the following will be higher, lower, or the same if this economy had taken no action. i Real GDP ii Potential GDP iii The inflation rate iv The unemployment rate
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter19: The Macroeconomic Perspective
Section: Chapter Questions
Problem 12RQ: What are the main components of measuring GDP with what is produced?
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Transcribed Image Text:Refer to the table above to answer the
questions below:
a) Explain whether a contractionary or an
expansionary fiscal or monetary policy
should be implemented in 2021.
b) Based on you answer to part a) above,
identity one monetary and fiscal policy
instrument.
c) If the economy is successful in keeping
real GDP at its potential level in 2021, state
whether each of the following will be
higher, lower, or the same if this economy
had taken no action.
i Real GDP
ii Potential GDP
iii The inflation rate
iv The unemployment rate
d) Now let us suppose that real GDP in 2021
was higher than the potential GDP in 2021.
What would your answer to part a) and part
b) be under this scenario?
Transcribed Image Text:YEAR POTENTIAL GDP REAL GDP
PRICE LEVEL
2020
$1500 billion
$1500 billion
100
2021
$1590 billion
$1560 billion
105
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