In the Keynesian model, an increase in government spending increases ___. A.aggregate demand by an equal amount. B.aggregate demand by a multiple amount. C.the money supply by a multiple amount. D.the money supply by an equal amount.
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- In Paynia the marginal propensity to consume is .6. Times are tough and the economy is operating on the flat ("Keynesian") range of the Aggregate Supply Curve. If Congress wished to increase Aggregate Demand by $500 B, how much would it need to raise Government Spending, all else constant?Prompt We have been discussing major macroeconomic concepts like the ADAS Model and Fiscal Policy. This is an opportunity to apply that knowledge to a real-world scenario. Choose one of the following scenarios and identify whether it is an example of a recessionary economy or inflationary economy. Next, analyze possible Neoclassical solutions for it. Then, analyze possible Keynesian solutions for it. What would the impact on the economy be in the short-run? Long-run? Scenario 1: An increase in the unemployment rate to 7.4% has occurred. Inflation has increased causing a decline in consumer spending. Exports have declined by more than $4 billion. This has caused a decrease in GDP by 3.7%. Scenario 2: An increase in consumer and government spending has occurred. This has increased GDP by 4.4%. Currently, inflation rate has increased to 1.6%. Unemployment has remained at 5.5%. Scenario 3: An increase in the stock market by 26.5% has occurred. Companies are stockpiling the earnings…1. Long run self adjustment in the AD-AS model. Take an example 2. Fiscsal policy . Take an example 3. automatic stabilizers. Take an example
- Macroeconomics question: In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government spending by: A. $20 billionB. $10 billionC. $40.50 billionD. $31.25 billionWhich of the following statements about Fiscal Policy is INCORRECT? choose the correct answer(a) In order to combat inflation, the South African Reserve Bank must apply acontractionary fiscal policy;(b) A contractionary fiscal policy can result in higher levels of unemployment; (c) Expansionary fiscal policy will increase the budget deficit; (d) The application of fiscal policy will have no effect on aggregate supply in theAD‐AS modelMacroeconomics: 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)
- a) In the classical model, what is the impact of changes in the demand for goods and services on aggregate output? b) Did classical economists pay much attention to the supply-side effects of changes in income tax rates in the nineteenth and early twentieth centuries? Why or why not? What about supply-side economics?(47). If the federal budget were balanced annually O. monetary policy would become the chief tool for achieving economic stability O. the money rule could not be implemented O. business cycles would be virtually eliminated O. fiscal policy would become the chief tool for achieving economic stability (52). Listen Keynes believed that the money supply played a minor role, if any, in causing changes in the business cycles. O. True O.FalseSuppose Congress decides to reduce the budget deficit by cutting government spending. a. Use the Keynesian-cross model to illustrate graphically the impact of a reduction ingovernment purchases on the equilibrium level of income. Be sure to label: i) the axes;ii) the curves; iii) the initial equilibrium values; iv) the direction the curve shifts; andv) the terminal equilibrium values. b. Explain what happens to equilibrium income as a result of the cut in governmentspending.
- Autonomous Spending: $1,000 Invest2, 000 Government Spending: $3, 000 Exports: $500 C1: .55 Tax Rate: .22Marginal Propensity to Import: .09 If Investment drops by 20%, and if the government decides not to spend, whatwould the new tax rate have to change to in order to offset the drop in Y?Keynes broke with the classical and neo-classical economic perspective in regards to the belief of in self-correcting free markets. Discuss and explain Keyne's critique of Say's law and discuss why Keynes argued markets could reach equilibrium below the natural rate of unemployment.12. Of the following reasons why fine-tuning the economy is not likely to be successful, which one involves the difficulty of crafting and assembling a political consensus around a set of measures to counteract the economy's shift in direction? a) Recognition lag b) Policy lag c) Implementation lag d) Impact lag e) None of the above
