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Topic 2. Discuss characteristics of an economy that helps itself correct from a recessionary gap.
Step by step
Solved in 3 steps
- Q1. Explain and diagrammatically represent how a self-regulating economy removes itself from a recessionary gapAn economy is at full employment. Which of the following events can create a recessionary gap? A.An increase in foreign income. B.An increase in government spending. C.An increase in taxes. D.A decrease in nominal wages.When an economy is experiencing a recessionary gap, the likely outcome is a) quickly rising output prices. b) an increase in the number of workers receiving employment -insurance benefits. c) the number of employment - insurance recipients being the lowest ever . d) consumers optimistic about the future.
- Why did Keynes believe that the proper response to a period of recession was for the government to increase its spending? How could this policy help to combat recession? Use diagram.Macroeconomics: Assuming marginal propensity to consume is 0.5. If there is a shock to the economy that increases investment spending by 200 billion dollars what will the total Change to GDP be? (Ignore taxes and imports)Compare and contrast the effect of expansion and recession on selected variables like output and employment.
- Please answer the question: * the attached photo is for you to see that it is connected to the question * If current real GDP is P700 billion, which of the following policies would bring the economy to potential output? a. decrease taxes by P100 billion b. increase taxes by P100 billion c. decrease taxes by P25 billion d. increase taxes by P25 billionQuestion 59 If the economy produces at the point of long-run macro-economic equilibrium then real GDP Question 59 options: a) is less than potential GDP b) any of the above answers could be true c) equals potential GDP d) exceeds potential GDPSuppose that there’s a recessionary gap, and the country wishes to produce its potential output. Which of the following policy initiatives might help it reach this goal? A.the government increases taxes on consumers and corporations. B.the government initiates policies that encourage private investment spending. C.the government cuts spending programs. D.the government initiates policies that discourage private investment spending.