Our macroeconomic model suggests that after a decline in aggregate demand like that of 2007, the economy will self correct and return to a position where the GDP gap is zero. If this is correct, why should the government ever intervene with fiscal policy? a.It take many years for the GDP gap to close on its own. b.This is part of the government's "mission statement" as given in the Constitution. c.Fiscal policy is profitable for banks. d.People do not trust the theory behind the model.

"GDP (gross domestic product) measures the value of all finished goods and services produced within…

Answered: Our macroeconomic model suggests that…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.B: Algebraic Treatment Of Taxes And Fiscal Policy

Problem 3TY

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Our macroeconomic model suggests that after a decline in aggregate demand like that of 2007, the economy will self correct and return to a position where the GDP gap is zero. If this is correct, why should the government ever intervene with fiscal policy?

	a.	It take many years for the GDP gap to close on its own.
	b.	This is part of the government's "mission statement" as given in the Constitution.
	c.	Fiscal policy is profitable for banks.
	d.	People do not trust the theory behind the model.

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