Please answer the attached question: Diagram 1PriceLevel(PL)YFAD3O ADOO AD1O AD2O AD3AD4AD2ADIASSRIIf you cannot see the image above, Click here to download.Quantity of RealGDP (Y)Refer to Diagram 1, in which YF is the full-employment output. A contractionary fiscalpolicy would be most appropriate if the economy's present Aggregate Demand curvewere at:

Aggregate Demand Aggregate demand refers to the entire amount of demand for all completed goods and…

Diagram 1 Price Level (PL) O ADO O AD1 YF O AD2 ADS O AD3 AD4 AD2 If you cannot see the image above, Click here to download. ADI ASSRI Refer to Diagram 1, in which YF is the full-employment output. A contractionary fiscal policy would be most appropriate if the economy's present Aggregate Demand curve were at: Quantity of Real GDP (Y)

Diagram 1 Price Level (PL) O ADO O AD1 YF O AD2 ADS O AD3 AD4 AD2 If you cannot see the image above, Click here to download. ADI ASSRI Refer to Diagram 1, in which YF is the full-employment output. A contractionary fiscal policy would be most appropriate if the economy's present Aggregate Demand curve were at: Quantity of Real GDP (Y)

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 6P

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Similar questions

Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending by the University of Illinois is not fiscal policy? Why is a cut in the payroll tax fiscal policy whereas a cut in a state income tax is not fiscal policy?
What is a potential problem with a temporary tax increase designed to increase aggregate demand it people know that it is temporary?
You are studying an economy with an income tax rate, t1, of 32%and an MPS of 0.3. It is currently suffering from a “recessionary gap” of $500 m. (i.e., Eqm Y<Y full employment, FE, aka Yn). Make the necessary calculations for the topolicythat it should institute; who does what? Provide the full name of this policy. Compare this economy to one without income taxes to explain the term “automatic stabilizer.”[Hint: Let I change and compare the I multipliers in each of these economies.] \
a. You are studying an economy with an income tax rate, t1, of 32% and an MPS of 0.3. It is currently suffering from a “recessionary gap” of $500 m. (i.e., Eqm Y<Y full employment, FE, aka Yn). Make the necessary calculations for the to policy that it should institute; who does what? Provide the full name of this policy. Compare this economy to one without income taxes to explain the term “automatic stabilizer.” [Hint: Let I change and compare the I multipliers in each of these economies.]
Illustrate and describe the effects of an expansionary fiscal policy action with a flex ER and NFM (a = 0) using the IS-LM-BP model. (show graph)
a) Draw an aggregate demand/aggregate supply graph of an economy in a Recessionary situation. b) show clearly the GDP gap on your graph. c) examine the impact of the fiscal policy described above on the relevant components of AD and SRAS( if applicable). Account for the role of the autonomous spending multiplier.
In October 2016, the Malaysian Prime Minister, Datuk Seri Najib Tun Razak tabledout Bajet 2017 in which certain actions will be undertaken to strengthen the state of theeconomy. Also, in 2016, Malaysia’s fiscal budget deficit stood at approximately 3.1% ofthe country’s gross domestic product (GDP).i. Provide two (2) real examples of how the Malaysian governmentimplements fiscal policy as announced in Bajet 2017.(6 marks)iii. Using an AD-AS graph to represent the macroeconomy, explain how oneof the actions of Bajet 2017 aim to stimulate aggregate demand and bringthe economy from a state of ‘recessionary gap’ back to potential GDP