Explain why increased government spending of, for example, $15 billion, will have a different impact on aggregate demand than a $15 billion tax cut.

Q: Which of the following illustrates the effectiveness lag? A.Policymakers implement contractionary…

A: Effectiveness lag can be understood as when the policy is implemented or any change in policy is…

Q: A contractionary fiscal policy shifts the aggregate demand curve leftward. true or false?

A: Fiscal Policy: It refers to the decision of the government regarding spending and taxation.…

Q: Assume that a hypothetical economy with an MPC of 0.75 is experiencing a severe recession.…

A: Answer: Given, MPC=0.75 (a). The formula for the increase in aggregate demand is given below: Change…

Q: Based on your understanding of the multiplier effect and the crowding-out effects, do you think that…

A: The macroeconomic equilbrium in an economy occurs at the point where the aggregate demand in the…

Q: Which of the following is an example of an automatic stabilizer? When the economy goes into a…

A: The automatic stabilizer is changing in the fiscal policy that helps to stimulate the aggregate…

Q: Consider an economy that is operating below the full-employment level of real GDP. What would be the…

A: Meaning of Gross Domestic Product (GDP): The term gross domestic product refers to the situation…

Q: The Australian government is concerned about the growing budget deficit, so they decide to cut…

A: Answer: GDP can be calculated by adding up C+I+G+(X-M), where C is private consumption expenditure,…

Q: Which of the following is true according to mainstream economics? If a balanced budget amendment to…

A: Many prominent economists do not believe that a balanced budget is necessary to address the US…

Q: Define what is 'automatic stabiliser' in fiscal policy, and provide 2 examples

A: Meaning of Fiscal Policy: The term fiscal policy refers to the situation under which the…

Q: Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession.…

A: Given information: mpc = 0.8   * Government spending multiplier: ∆Y∆G = 11-mpc   * Tax multiplier:…

Q: Which of the following is an example of contractionary fiscal policy? A. Cutting spending B.…

A: Fiscal policies are managed/controlled by the government of the country whereas monetary policies…

Q: A cut in taxes will have a greater impact on aggregate demand if it is given to: a. people with a…

A: Marginal propensity to consume shows the change in consumption with respect to change in income.

Q: Right now many economies in the world are experiencing a downturn due to the Corona Virus. a) What…

A: Hello, thank you for the question. Since there are multiple subpart questions posted here, only the…

Q: |An economy is in a below​ full-employment equilibrium.   What is the effect on aggregate demand and…

A: The full-employment level is the situation when an economy is able to reach its potential output…

Q: Explain how time lags present an additional problem in fiscal policy.

A: Fiscal policy is policy of expenditure and taxes. Fiscal policy is operated by the government. Lags…

Q: The tax multiplier is always more effective in stimulating the economy than government multiplier…

A: In Keynesian economics, it is assumed that changes in aggregate demand in the economy are able to…

Q: Suppose the MPC is 0.60. Assume there are no crowding out or investment accelerator effects. Please…

A: Given, MPC = 0.60

Q: what is a potential problem with a temporary tax decrease desighned to increase aggregate demand if…

A: The federal government's tax system depends on a devising a number of taxes in order to generate…

Q: Which of the following is true according to mainstream economics? If a balanced budget amendment to…

A: Many prominent economists do not believe that a balanced budget is necessary to address the US…

Q: Fiscal Policy) Define fiscal policy. Determine whether each of the following, other factors held…

A: Fiscal policy may be a government measure to stabilize the economy, specifically by manipulating the…

Q: To enact Contractionary Fiscal Policy, the federal government must be running a budget ___________.

A: Contractionary fiscal policy is the point at which the public authority either reduces spending or…

Q: How relevant is the multiplier concept to the implementation of expansionary and contractionary…

A: Spending multiplier: - it is a fraction that shows the magnitude of the change in national income…

Q: In 2009, the US Federal government cut taxes by approximately $300 billion, increased government…

A: GDP stands for a gross domestic product which is the monetary value of all final goods and services…

Q: What is a potential problem with a temporary tax decrease designed to increase aggregate demand if…

A: Tax is the unilateral payment made by the public to the government.

Q: Which of the following is true regarding the simple tax multiplier?

A: The multiplier impact of a tax reduction can be impacted by the size of the tax break, the MPC to…

Q: Which of the following statements is FALSE?   A. An expansionary fiscal policy might consist of an…

A: Discretionary fiscal policy is a policy in which the government made changes in its spending and/or…

Q: Differentiate between the expansionary fiscal policy and contractionary fiscal policy with diagram…

A: Fiscal Policy: Fiscal policy is used to influence aggregate demand and maintain stability in the…

Q: Why do Republicans like tax cuts? Why are tax cuts a good thing? How does it affect the aggregate…

A: Answer -  We can not generalise that Republicans like tax cut or not but long line of US presidents…

Q: Should the government fight recessions with spending hikes rather than tax cuts ? Explain

A: Government spending and tax reductions have different multiplying effects on the economy.

Q: In each of the following cases, either a recessionary or an inflationary gap exists. Assume that the…

A: Real GDP equals $100 billion, potential output equals $160 billion, and the marginal propensity to…

Q: When the economy is in a recessionary mode, what will likely be the actions by government using…

A: In recessionary mode, the government pursue the expansionary fiscal policy which has two tools which…

Q: Which of the following is an example of contractionary fiscal policy? Select an answer and submit.…

A: Fiscal policy is used by government to stabilize the economy either in terms of price or output.

Q: Suppose a government has a tax revenue shortfall. Will hyperinflation inevitably follow unless the…

A: Hyperinflation is a term used to define a nation's economic abrupt, disproportionate, and…

Q: Examine the following policies and determine which would decrease the level of aggregate demand.…

A: Answer to the question is as follows:

Q: The federal government implements an expansionary fiscal policy of increased spending and decreased…

A: Fiscal policy delineates the efforts put by the federal government to control and regulate the…

Q: If the MPS in an economy is .2 government could shift the aggregate demand curve leftward by $20…

A: Multiplier = 1/MPS = 1/0.2 = 5