Define inflation. Explain why inflation is a macroeconomic concern. Question 2: How can the government utilize the instruments within a fiscal policy to stimulate economic activity in an economy experiencing a recession.
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- Which of the following is an effective fiscal tool to control inflation in boom times?a) Reducing government spendingb) Increasing government spendingc) Decreasing taxationd) Increasing money supplyFiscal policy can take much longer to act than monetary policy given there are lags that can occur in the process. The time that it takes to determine whether or not a recession has occurred is referred to as the a. recognition lag. b. legislative lag. c. implementation lag. d. structural lag.Which of the following would be a fiscal policy prescription for ending inflation? A) Raise taxes B) Increase government expenditures to let the multiplier work C) Raise interest rates to stimulate saving D) Promote exports to increase injections in the domestic economy
- Which of the following statements are FALSE? (a) When the government prints money to buy goods and services the resulting inflation is a form of tax, since people will not have to pay more for their goods and services than before. (b) An effective fiscal policy macroeconomic stimulus should aim to replace private spending with public (government) spending. (c) To be effective a fiscal policy macroeconomic stimulus should have temporary increases in spending and permanent tax cuts. (d) The paradox of thrift is that the increase in saving during a recession because people postpone major purposes prolongs the recession and thus is not good for the economy, while normally saving grows the economy.The Government of Bangladesh opted for expansionary fiscal policy to fight economic depression. Identify the type of inflation it is expected to create and its impact on the wages. Illustrate the process on the graph. Assume the Pakistan’s economy is in recession: Pakistan implements a combination of expansionary fiscal and monetary policy. In the absence of complete crowding out what will be the effect of these policies on each of the following:(i) Aggregate demand in Pakistan(ii) The price level in Pakistan(iii) Interest rates in PakistanWhich do you believe is the better macroeconomic policy to use for stabilizing (achieving potential GDP and controlling inflation) the economy - Monetary or Fiscal? SUPPORT your stance (for example, if you believe fiscal policy is better than monetary policy, explain how fiscal policy (pros) achieves these objectives better than monetary policy (cons)).
- 29. Increasing the public debt can be associated witha. an expansionary fiscal policy.b. an expansionary monetary policy.c. a contractionary fiscal policy.d. a contractionary monetary policy. 30. Increasing the debt ceilinga. is tied to the increase in the CPI.b. must be approved by Congress.c. must be approved by the Federal Reserve Bank.d. would have been opposed by John Maynard Keynes since his most important policy recommendation was to balance the budget.e. both b) and d) are correct.If the government tries to reduce inflation when the production level in the country is higher than potential Gross Domestic Product, then one of the following answers which depicts a fiscal policy measure will be able to achieve that goal. Which one? Group of answer choices decrease in government spending decrease corporate tax rates decrease the interest rate increase transfer paymentsPlease answer the following question: 1. Economic advisors who fear that economy is growing too rapidly and that inflation may accelerate to high levels whould recommend that the government decreases spending/or increase taxes. a) True b) False
- Explain how discretionary fiscal or monetary policies can be used to bring down the inflation rate. Explain how discretionary fiscal or monetary policies can be used to move the economy out of recession. In times of recession what can government do to lessen the economic hardship faced by those who lost their jobs?Using the AD/AS Model, construct 2 graphs that show how a recession can occur. Explain how discretionary fiscal or monetary policies can be used to move the economy out of recession. • Using the AD/AS Model, construct 2 graphs that show how higher rates of inflation can occur. Explain how discretionary fiscal or monetary policies can be used to bring down the inflation rate. • In times of recession what can government do to lessen the economic hardship faced by those who lost their jobs?The US government has recently announced and started to implement a large-scale fiscal expansion to mitigate the negative effects of the coronavirus pandemic and reboot the US economy. The Biden administration argued that this fiscal stimulus policy can rapidly accelerate the economic recovery without triggering high levels of inflation. How is the effect of US fiscal stimulus policy in terms of its possible effect on inflation.