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1 . a. Define the following:
-Inside lag
-Outside lag
b. Which has the longer lag-monetary or fiscal policy? Which has the longer
outside lag? Give reasons for your answer?
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- Define the following: -Inside lag -Outside lag Which has the longer lag-monetary or fiscal policy? Which has the longer outside lag? Give reasons for your answer?Explain what are the lags in macroeconomic policies. Do these lags have more effect on monetary policy or fiscal policy and why?Assume the United States economy is in recession. (a) Explain the effect of the recession on: (i) short-run price level (ii) short-run output (iii) unemployment (b) If 78% of newly unemployed workers are optimistic that they can return to their jobs, what impact will that have on the macroeconomy? Explain. (c) Assume the United States implements a combination of expansionary fiscal and monetary policies. In the absence of complete crowding out, what will be the effect of these policies on each of the following? (i) Aggregate demand in the United States. Explain. (ii) The price level in the United States. Explain. (iii) Interest rates in the United States. Explain. (d) The US Government decides to enact $100 billion in fiscal stimulus. Assume that the marginal propensity to consume is 0.5. (i) What is the impact on GDP of $100 billion in government checks? (ii) What is the impact of GDP of $100 billion in government spending on infrastructure and purchases of agricultural…
- What causes the lags in the effect of monetary and fiscal policies on aggregatedemand? What are the implications of these lags for the debate over active versuspassive policy?Start with a brief introduction that explains use of Government policy to control the economy. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both. What specific fiscal policy tools would you use to stimulate aggregate demand and how? What specific monetary policy tools would you use to stimulate aggregate demand and how? What is your conclusion, should policymakers use the monetary and or fiscal policy, or a combination of both, to stimulate aggregate demand? Explain your reasoning.Determine how each of the following monetary or fiscal policy would shift the aggregate demand curve. Illustrate and explain the following effect. a. Assuming the economy is under full employment, the central bank receives news of a potential economic boom and has decided on a risky measure by conducting contractionary monetary policy. Illustrate and explain the effect of the policy using AD-AS curve.
- If the U.S. Congress passes legislation to raise taxes to control inflation, what kind of policy is this? Group of answer choices A. Expansionary monetary policy B. Contractionary fiscal policy C. Contractionary monetary policy D. Expansionary fiscal policyExplain the difference between fiscal policy and monetary policy. What are some of the reasons these macroeconomic policies are used? Elaborate on reasons these policies are used.What specific monetary policy tools would you use to stimulate aggregate demand and how? What specific fiscal policy tools would you use to stimulate aggregate demand and how?
- *Does monetary or fiscal policy have a longer time lag? Why?Explain what kind of fiscal policy and what kind of monetary policy are likely to reduce GDP.Use the following scenarios to compare the effectiveness of monetary and fiscal policies with respect to the following: (a) An increase in aggregate demand to recover from a recession. (b) An increase in aggregate supply to increase employment. (c) Time lag differences (d) Influencing interest rates