Fiscal policy is used to shift AD. The outcome depends on the shape of the AS curve - whether AS is upward sloping, vertical or horizontal. It follows that a right shift in aggregate demand will cause no change in price level or output if AS is upward sloping. higher price level, but not higher output if AS is vertical. higher price level, but no change in output if AS is horizontal. higher output, but no change in price level if AS is vertical.
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- Fiscal policy is used to shift AD. The outcome depends on the shape of the
AS curve - whether AS is upward sloping, vertical or horizontal. It follows that a right shift in aggregatedemand will cause
- no change in
price level or output if AS is upward sloping. - higher price level, but not higher output if AS is vertical.
- higher price level, but no change in output if AS is horizontal.
- higher output, but no change in price level if AS is vertical.
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- If taxes are increased, the AD curve Select one: a. shifts rightward and aggregate demand decreases. b. shifts leftward and aggregate demand decreases. c. does not shift but there is a movement down along the curve. d. is not affected because a change in taxes is a nominal change not real change.The country of Merryville has an unemployment rate that is greater than the natural rate of unemployment. Using a correctly labeled graph of aggregate demand and aggregate supply, show the current equilibrium real gross domestic product, labeled YC, and price level in Merryville, labeled PLC. The president of Merryville is receiving advice from an economic adviser who advises the president to decrease personal income taxes. How would such a decrease in taxes affect aggregate demand? Explain. The government of Merryville increases spending on goods and services by $200 billion, which is financed by borrowing. If the marginal propensity to consume in Merryville is 0.75: Calculate the multiplier What is the maximum possible change in real gross domestic product (GDP) that could result from the $200 billion increase in government spending?According to the Keynesian ideas on Aggregate Demand, a macroeconomist would most likely expect business expenditure to increase when ... Group of answer choices a. Interest rates are low and expected returns are low b. Interest rates are high and expected returns are high c. Interest rates are low and expected returns are high d. Interest rates are high and expected returns are low
- We can shift the AD curve to the right by lowering taxes having the Fed buy bonds from banks lowering interest rates doing expansionary fiscal policy All listed options are correct.The aggregate demand curve shows the Multiple Choice inverse relationship between the price level and the quantity of real GDP purchased. direct relationship between the price level and the quantity of real GDP produced. inverse relationship between interest rates and the quantity of real GDP produced. direct relationship between real-balances and the quantity of real GDP purchased.Assume that the economy is in equilibrium when aggregate demand curves shifts to the right. What happens to the economy in the short-run? the GDP gap becomes positive. Allowed to self-correct, the economy will experience higher inflation. the GDP gap becomes negative. Allowed to self-correct, the economy will experience higher inflation. the GDP gap does not change, but the inflation rate will rise. there is not enough information to answer the question.
- Read the following excerpt. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. Draw and label the change that would occur on the AD/AS graph as a result of the policy action described. Identify what will happen as a result of the policy to the price level, employment, and real GDP. Excerpt from Public Law 110-85 of the 110th Congress: Signed into law by President George W. Bush February 13, 2008 “To provide economic stimulus through recovery rebates to individuals, incentives for business investment, and an increase in conforming and FHA loan limits. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. Title I – Recovery Rebates and Incentives for Business Investment … Sec. 101. 2008 recovery rebates for individuals. Sec. 102. Temporary increase in limitations on expensing of certain depreciable business assets Sec. 103. Special allowance for certain property acquired during 2008.”…Read the following excerpt. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. Draw and label the change that would occur on the AD/AS graph as a result of the policy action described. Identify what will happen as a result of the policy to the price level, employment, and real GDP. Excerpt from Public Law 110-85 of the 110th Congress: Signed into law by President George W. Bush February 13, 2008 “To provide economic stimulus through recovery rebates to individuals, incentives for business investment, and an increase in conforming and FHA loan limits. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. Title I – Recovery Rebates and Incentives for Business Investment … Sec. 101. 2008 recovery rebates for individuals. Sec. 102. Temporary increase in limitations on expensing of certain depreciable business assets Sec. 103. Special allowance for certain property acquired during 2008.”…Keynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP) to be "too low," then an appropriate policy action would be to do nothing, because the economy is self-adjusting. raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP) with little or no inflationary consequences. increase taxes, thereby causing aggregate demand to increase and inducing a rise in real Gross Domestic Product (GDP) with little or no inflationary consequences. reduce the money stock, thereby causing aggregate demand to decrease and inducing a rise in fall in the price level that generates an increase in total planned expenditures.
- Read the following excerpts. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. Draw and label the change that would occur on the AD/AS graph as a result of the policy action described in each. Identify what will happen as a result of the policy to the price level, employment, and real GDP. Excerpt from FOMC Meeting Minutes Press Release February 6, 1981 “Shortly after the November 18 meeting, incoming data indicated that the monetary aggregates were growing considerably faster than the rates consistent with the Committee’s objectives for the September-to-December period… These developments were associated with additional upward pressures on the federal funds rate and other short-term interest rates; in the first statement week after the meeting, the funds rate was at about or somewhat above the upper limit of the range of 13 to 17 percent specified by the Committee, compared with an average of 14 ½ percent in mid-November. In a telephone…Read the following excerpts. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. Draw and label the change that would occur on the AD/AS graph as a result of the policy action described in each. Identify what will happen as a result of the policy to the price level, employment, and real GDP. Excerpt from President Jimmy Carter’s televised speech delivered October 24, 1978 “Good evening. I want to have a frank talk with you tonight about our most serious domestic problem. That problem is inflation. Inflation can threaten all the economic gains we’ve made, and it can stand in the way of what we want to achieve in the future. This has been a long-time threat. For the last 10 years, the annual inflation rate in the United States has averaged 6-1/2 percent. And during the three years before my inauguration, it had increased to an average of 8 percent. If inflation gets worse, several things will happen. Your purchasing power will continue to decline,…Determine whether the events below will cause the aggregate demand curve to shift to the left or to the right. Assume the price level remains constant. a. Government purchases increase by $2 billion. Aggregate demand shifts (Click to select) to the right to the left . b. Real interest rates increase. Aggregate demand shifts (Click to select) to the right to the left . c. Taxes increase. Aggregate demand shifts (Click to select) to the left to the right . d. Aggregate consumption decreases as consumer confidence falls. Aggregate demand shifts (Click to select) to the right to the left .