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.

Q: Fiscal policy is conducted by the government and aims at boosting the economy; which of the…

A: The economies around the world have various entities, which are considered to be decision makers,…

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: When an economy is already at full employment, what is the outcome of expansionary fiscal policies…

A: The fiscal policy is an automatic stabilizing policy in which the government either use it spending…

Q: Explain and show the consequence for fiscal policy if the marginal propensity to consume is a…

A: Fiscal policies are the public authority made approaches made to control, fortify and support the…

Q: The graph below depicts an economy where an increase in aggregate demand has caused inflation.…

A: The change in the aggregate demand brings about the change in the output and price level. The change…

Q: Under which condition the fiscal policy has the maximum effect on real national income? Sketch graph…

A: Fiscal policy, measures used by governments to stabilize the economy, specifically by manipulating…

Q: Explain how the conduct of fiscal policy affects consumption and investment in equilibrium.

A: Fiscal policy is a macroeconomic policy that is implemented by the government for monitoring and…

Q: Expresses in detail the effects of expansionary and contractionary fiscal policy on income and the…

A: In an economy, fiscal policies are implemented by the government to influence the aggregate demand…

Q: What is an expansionary gap? What fiscal policy might close that gap?

A: Answer: Introduction: Expansionary gap: when the actual output level exceeds the potential output…

Q: fiscal policy

A: There are two policies which go hand in hand to regulate or stimulate the economy. The monetary…

Q: Explain each of these statements supported by reasonable reasoning:   1. Zero lag is among the…

A: Automatic stabilisers are ongoing government policies that adjust tax rates and transfer payments…

Q: If the government tries to reduce the unemployment rate when the economy is not doing well and is in…

A: Fiscal policy refers to changes in government spending and taxes in order to influence the economy.…

Q: Fiscal policy of increasing government expenditures can be more potent than monetary policy in…

A: Fiscal policy works through changes in government expenditures and changes in taxes, while monetary…

Q: Identify a change in fiscal policy that will shift the composition of output toward investment.…

A: When a contractionary fiscal policy is adopted, it reduces government spending and raises taxes,…

Q: Explain how automatic stabilizers work, both on the taxation side and on the spending side, first in…

A: Automatic stabilizers are economic parameters that act automatically to counter the fluctuations in…

Q: Refer to the above graph. Assume that the economy is in a recession with a price level of P2 and…

A: the aggregate demand is the total  number of goods and services svgjslly form crowd out.

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: Discuss Expansionary Fiscal Policy. Who is responsible for implementing fiscal policy? What may be…

A: Policies are created by the government in order to keep the economy on track and ensure economic…

Q: A government spends $500,000 as an expansionary fiscal policy. The spending multipler is 2. a) if…

A: Changes in the price level, affects the spending multiplier.

Q: One of the arguments against using fiscal policy is __________. Group of answer choices tax cuts…

A: The case against discretionary fiscal policy rests on two arguments: First, the possibility of…

Q: What is meant by discretionary fiscal policy? Give an example of how the government can use fiscal…

A: Discretionary fiscal policy is a planned change in the level of taxes or government expenditure.…

Q: If inflation is a major issue in the economy, what would be the correct fiscal policy response from…

A: Fiscal policy refers to changes or adjustments in the expenditure(spending) and/or the taxes so as…

Q: Create a graph with an aggregate demand curve and an aggregate supply curve in the short-run. Use…

A: An Aggregate Demand-Aggregate Supply model is a macroeconomic model that represents the incumbent…

Q: Suppose that a certain country has an MPC of 0.9 and an equilibrium real GDP of $500 billion. If…

A: The  Investment Multiplier proposes that the expansion in the Investments will prompt the income…

Q: Clearly distinguish between expansionary and contractionary fiscal policy.

A: Introduction Fiscal Policy Fiscal policy is controlled by the central government of the country.…

Q: Which one of the following propositions would be consistent with a supply-side view of fiscal…

A: Macroeconomics analyzes the economy as a whole. It studies aggregate economic concepts such as…

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

A: Answer- Fiscal Policy - This is a policy which a government adjusts its spending levels and tax…

Q: a. A recession. b. A stock market collapse that hurts consumer and business confidence. c.…

A: * ANSWER :-  (a)

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: List and briefly explain the time lags involved in discretionary fiscal policy.

A: Discretionary fiscal policy implies the public authority makes changes to taxation rates as well as…

Q: In mid-2001, the Bush administration won congressional approval for lower income tax rates. One…

A: Supply-side policies are based on the concept that tax cuts for producers and providers of commodity…

Q: Describe how expansionary fiscal policy can fail during a recession.

A: Fiscal policy refers to the policy taken by the government to influence the economy of a nation. The…

Q: What is the impact of using Fiscal policy tools on an economy - more specifically aggregate demand…

A: The aggregate demand is the aggregate demand of all the goods and services produced in the economy.…

Q: Explain how fiscal policy can be implemented if an economy is in the downswing of a business cycle.

A: Fiscal policy is tools available to the central government to mitigate the economic consequence by…

Q: Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in…

A: Expansionary Policy: Expansionary monetary arrangement incorporates tax breaks, move installments,…

Q: Classify each statement as an example of expansionary fiscal policy, contractionary fiscal policy,…

A: Contractionary fiscal policy: Contractionary fiscal policy refers that when the government decreases…

Q: Identify the type of Fiscal Policy The government reduces the wages of its employees while raising…

A: In an economy, governement enter the market using its policies, which are known as fiscal policies.…

Q: Explains in detail fiscal policy, its role, and its effects on short-term and long-term economic…

A: Fiscal Policy: The Fiscal Policy is the revenue and expenditure policy of the government to…

Q: Gokhale and Smetters (2003) found that the long-run fiscal imbalance in the U.S. government budget…

A: Gokhale and smettersbth economist of America researched on fiscal imbalance of America.In 2003,they…