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 currently producing above the full employment output, the government decided to increase the personal income tax as a form of contractionary fiscal policy. Illustrate and explain the effect of the policy using AD-AS curve. b. With the recession due to COVID-19, the central bank has decided to lower down discount rates and reserve requirements of the commercial bank. Illustrate and explain the effect of the policy using AD-AS curve.

Q: Another part of the initial fiscal response to the Covid-19 recession were checks sent to every ad…

A: Another part of the initial fiscal response to the Covid-19 recession were checks sent to every…

Q: Which of the following statements about Fiscal Policy is INCORRECT? (2) (a) In order to combat…

A: Contractionary fiscal policy reduces the aggregate demand via two ways first by increasing taxes…

Q: Question 15 Suppose the government decides to increase taxes by $30 billion to increase unemployment…

A: The correct answer is given in the second step.

Q: Explain how the fiscal policy tools used by the federal government should work in terms of fighting…

A: There are two tools of fiscal policy of any country. First is expenditure and second is taxes.…

Q: Diagram 1 Price Level (PL) O ADO O AD1 YF O AD2 AD3 O AD3 AD4 If you cannot see the image above,…

A:

Q: Analyze the effects of a contractionary fiscal policy on IS-LM model and AD-AS model when the labor…

A: The AD-AS model can be identified with the Phillips curve model of price inflation and joblessness.…

Q: Exercise 4 Use a combination of text and drawing of figures when answering the following questions:…

A: Fiscal policy Fiscal policy refers to the policy of the government and central bank of the nation…

Q: What, if anything, does expansionary fiscal policy do in the i-M space graph, cet. par.? Explain.…

A: The expansionary fiscal policy i.e. increase in public spending and reduction on taxes are the most…

Q: Suppose legislation required the government to balance its budget annually. With regard to real GDP,…

A: When government wants to maintain balanced budget in the economy, total revenue of the government…

Q: Consider a baseline short run equilibrium where output is 16 trillion dollars, and the price level…

A: we know that equilibrium level is achieved  where aggregate demand and aggregate supply are equal…

Q: Exercise 1  a) Use the equation for the circular flow of the real economy to give an overview of the…

A: Since you have posted a question with multiple sub–parts, we will solve the first three sub-parts…

Q: Which one of the Macroeconomic policy relating to government spending and borrowing? O a. a. Fiscal…

A: The economies around the world tend to focus on their growth, and development, where the policy…

Q: (a) The hypothetical information in the following table shows what the situation will be in if the…

A: Fiscal policy means the expenditure that is incurred in constructing the roads, railways, and…

Q: 2. The graph below shows the AD-AS diagram for Canada. 1200+ 1100+ 1000 AD 900 800 - 700+ 600 +…

A: The point at which aggregate demand and aggregate supply intersects is the point at which the actual…

Q: 2. Use IS-LM and AS-AD graphs to answer this question. a. Show an economy in a typical real business…

A: IS-LM model: The IS-LM model is a Keynesian macroeconomic model in which IS stands for "investment…

Q: C2. | Consider a closed demand-determined economy with fixed prices and wages. Consumption depends…

A: Slope of IS curve is determined by taking goods market equilibrium equation in the form of Y in…

Q: 10.2 In which of the following circumstances is expansionary fiscal policy more likely to lead to a…

A: Answer: (10.2). The fiscal policy is more likely to lead to a short-run increase in investment when…

Q: The use of government purchases (G) as a fiscal policy tool can have an effect on long-run growth in…

A: Government purchase is also known as the government spending on goods and services. The federal’s,…

Q: Discuss why the aggregate supply (AS) curve is relatively flat within the low ranges of aggregate…

A: The aggregate supply curve is relatively flat on the lower ranges of aggregate output. The reason is…

Q: Uganda has an unstable macroeconomic situation and the government has decided to increase its…

A: Hi! thanks for the question but as per the guidelines, we can answer up to three sub-parts at one…

Q: Fiscal Policy cannot stabilize the Economy if there is High Unemployment and High Inflation…

A: Contractionary policy will decrease aggregate demand and shift it to the left. This decreases real…

Q: The outbreak of COVID-19 pandemic in 2020-21 has had a significant impact on the Australian economy.…

A: Aggregate demand (AD) is the sum total amount of commodities and services demanded in an economy at…

Q: The graph below depicts an economy where an increase in aggregate demand has caused inflation.…

A: [a] To restore the aggregate demand, government had to reduce = 400-240 = $160 billion. Thus, the…

Q: Q.3.2 Explain, using the AD-AS model, how the South African Government can use fiscal policy as a…

A: Under various situations of uncertainty, there are various tools available before a government to…

Q: Assume that an economy is experiencing simultaneous equilibrium in both the product market and money…

A: The IS-LM model is based on short-run macroeconomics. This model analyses the interactions and…

Q: One of the main arguments against using Fiscal Policy is the crowding out effect. Suppose the…

A: Quantitative easing is a part of expansionary monetary policy.

Q: QUESTION 20 Consider an economy that is producing an aggregate output of Y2 shown in the figure…

A: Aggregate demand (AD): - It is the total demand of goods and services in an economy at a particular…

Q: One of the main arguments against using Fiscal Policy is the crowding out effect. Suppose the…

A: Crowding out effect Crowding out effect can be defined as a situation when increase in interest rate…

Q: Assume the following model of the closed economy in the short run, with the price level (P) fixed at…

A: given that, C=0.5(Y-T) T=1000 I=1500-250r G=1500 Md/p=0.5Y-500r Ms=1000

Q: The aggregate demand and supply for Cancum are shown in the table below. Potential GDP (LAS) is $900…

A: Equilibrium refers to the situation where the demand and supply of goods is equal. The price at this…

Q: In the first quarter 2020, the unemployment rate in the Gaza Strip reached to 69% due to COVID 19.…

A: To reduce unemployment and to keep it at low levels a general combination of demand-side and…

Q: graph depicts an economy originally in equilibrium at point e. Assume that the government uses…

A: Initially, economy is in equilibrium at point 'e' where LRAS, SRAS and AD intersects.  Now as…

Q: Assume an economy where the government embarks on an expansionary fiscal policy, explain the effect…

A: The IS curve shows all the combinations of income level and interest rate level at which goods…

Q: Figure 41 Туре Frictional Current Rate 2.1 Structural 22 Cyclical 2.5 Using Okun's Law and the data…

A: Macroeconomics is a sub-part of economics that is used to understand, the policies and fiscal…

Q: The graph below depicts an economy where an increase in aggregate demand has caused inflation.…

A: Given information: Initial long-run equilibrium occurs at the intersection point of LRAS, AS, and…

Q: a. The Covid-19 pandemic has signifigantly effect the economy around the world and the suitable…

A: Aggregate demand means the aggregate expenditure that all the sectors of the economy are planning to…

Q: Explain, using the AD‐AS model, how the South African Government can use fiscal policy as a tool to…

A: Fiscal policy includes the regulation of an economy by a government through bringing changes in…

Q: Discuss the current Fiscal Policy with the impact of the coronavirus on macroeconomics in place to…

A: The economics as a study is based upon the idea that the resources which are present with the…

Q: SRAS PL PL AD2 AD REAL GDP Y,Y2 The Aggregate Demand Model shows an increase in Aggregate Demand or…

A: Here, according to the given graph, aggregate demand is increased that shifts the Aggregate demand…

Q: Assume that following relationships hold in the Ghanaian economy: C = 100 + 0.7(Y− T) I = 150 G = ?…

A: First we calculate equilibrium Y using G = 940: Y = C + I + G Y = 100 + 0.7(Y - 200) + 150 + 940 Y =…

Q: Draw and AS-AD model of an economy suffering from unemployment. What is one fiscal policy that can…

A: The aggregate demand curve shows the negative relationship between the price level and the total…

Q: The current COVID-19 wave of new cases have caused the residents of a given economy to reduce their…

A: A decrease in consumption will shift the IS curve to the left . In the AD - AS diagram , it reduces…