Explain how an increase in government spending (or, equivalently, a cut in taxes) is unlikely to lead to any increase in output neither in the short nor in the long run
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Explain how an increase in government spending (or, equivalently, a cut in taxes) is unlikely to lead to any increase in output neither in the short nor in the long run
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- Suppose the government undertakes a large spending program to build community colleges and to make higher education free for many low-income families. How would you expect the program to affect output in the short run? Assuming that the program succeeds in increasing the skills of some workers, how would you expect it to output in the long run?Logically discuss the impact of the increase in governmenttaxes on consumption in the long run.If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?
- Using the concept of a multiplier, explain why mass layoffs by large companies such as Boeing or General Motors are a concern to the citizens and leaders where those firms are lockedWhich of the figures above illustrates an economy in long-run equilibrium? A) Figure A B) Figure B C) Figure CIn response to the deep recession that began in December 2007, U.S. President George W. Bush signed legislation in February 2008 to cut income taxes temporarily. One year later, U.S. President Barack Obama approved a much larger package of temporary tax cuts and increases in government spending to counter the economic slump. Assume that the economy had adjusted back to long-run equilibrium prior to the government interventions taking effect. So, starting from long-run equilibrium, where on the graph below would the economy be after this initial increase in government spending, ceteris paribus, but before any self-adjustment? 0. (Yp; πT) O. (YP; π3) O. (Y0; π2) O. (Y1; π1)
- Unlike the Suez Canal, the Panama Canal is highly relevant for the US economy. A blockage of the Panama Canal could produce severe supply disruptions for the US economy. Suppose there is a severe blockage of the Panama Canal that last for six weeks. The following questions consider how such a blockage of the Panama Canal would affect the US economy in the short-run. Create a graph that shows how a blockage of the Panama Canal would affect the US economy in the short run.Q. In January 2009, the federal government announced an economic stimulus package of $35 billion in response to the recession in Canada. (a) Is this an example of hands-off or hands-on position on government policy? Explain. (b) Where can you find out what happened to Canada’s GDP in the years following the stimulus spending?How do you think a firm will be able to maximize their profits if the economy starts to go into a recession?
- The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose the government increases spending on building and repairing highways, bridges, and ports.Using a graph and words, explain the effect of SRAS and LRAS curves when the President of the United States would give businesses who invested in new plant and equipment an investment tax credit equal to 10 percent of their investment and the marginal tax rate has been reduced to people who make over $50,000 and are permanent. Will you work more or less when marginal tax rates are cut and will businesses invest more in plant and equipment when an investment tax credit has been implemented by the President of the United States? Also explain in your graph what will happen to equilibrium price level and equilibrium real GDP and the unemployment rate when the marginal tax rates are cut and are permanent for people making over $50,000 and the investment tax credit has been implemented by the President of the United States.Macroeconomics is an aggregate of what happens at the microeconomic level. Would it be possible for what happens at the macro level to differ from how economic agents would react to some stimulus at the micro level? Think about the behaviour of crowds.
