The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilizethe economy.Which of the following are arguments in favour of active stabilization policy by the government? Check all that apply.Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses.Central banks can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates.Businesses make investment plans many months in advance.Changes in government purchases and taxation must be passed by parliament.Which of the following are examples of automatic stabilizers? Check all that apply.Corporate income taxesAn emergency bailout of the financial sector by the governmentBank rateO O O OO O O 17. Problems with Countercyclical Fiscal PolicyCountry Y is entering a recession and is debating a stimulus package of tax cuts and increased government spending to counter it. Advocates of the package contend that the situation in Country Ymakes countercyclical fiscal policy appropriate, while opponents claim the opposite. For each of the following characteristics of Country Y, indicate whether it supports arguments for the stimulus oragainst the stimulus.In Country Y, temporary government spending can be quickly decreased when it is no longer warranted.O Supports arguments against the stimulusSupports arguments for the stimulusThe central bank of Country Y, is not going to use monetary policy to counter the recession.Supports arguments against the stimulusO Supports arguments for the stimulus

DISCLAIMER “Since you have asked multiple question, we will solve the first question for you. If you…

h of the following are arguments in favour of active stabilization policy by the government? Check all that apply. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. Central banks can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Businesses make investment plans many months in advance. Changes in government purchases and taxation must be passed by parliament. h of the following are examples of automatic stabilizers? Check all that apply. Corporate income taxes O O O O

h of the following are arguments in favour of active stabilization policy by the government? Check all that apply. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. Central banks can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Businesses make investment plans many months in advance. Changes in government purchases and taxation must be passed by parliament. h of the following are examples of automatic stabilizers? Check all that apply. Corporate income taxes O O O O

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 53P: Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in...

See similar textbooks

Similar questions

Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
What is the main advantage of automatic stabilizers over discretionary fiscal policy?
What would happen if expansionary fiscal policy was implemented in a recession but, due to lag, did not actually take effect until after the economy was back to potential GDP?
Explain how automatic stabilizers work, both on the taxation side and on the spending side, first in a situation where the economy is producing less than potential GDP and then in a situation where the economy Is producing more than potential GDP.
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 the main reason for employing contractionary fiscal policy in a time of strong economic growth?
What is the main reason for employing expansionary fiscal policy during a recession?
What are some of the ways fiscal policy might encourage economic growth?
What would happen if contractionary fiscal policy were implemented during an economic boom but, due to Lag, it did not take effect until the economy slipped into recession?
In a recession, does the actual budget surplus or deficit fall above or below the standardized employment budget?
Assume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.
Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer: A recession. A stock market collapse that hurts consumer and business confidence. Extremely rapid growth of exports. Rising inflation. A rise in the natural rate of unemployment. A rise in oil prices.