The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now stock market prices begin significant increases, causing peoples’ investments, such as their retirement accounts and other investments, to increase in value. People feel very good about the future and use their new-found wealth to buy things that they had been hesitant to purchase in the past. Include detailed answers to the following questions: 1. What would be the likely impact on the government budget and national debt of the use of these fiscal policy tools (taxes, government expenditure, transfer payments, and interest rates)? 2. How would the use of these fiscal policy tools stabilize the economy?

The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now stock market prices begin significant increases, causing peoples’ investments, such as their retirement accounts and other investments, to increase in value. People feel very good about the future and use their new-found wealth to buy things that they had been hesitant to purchase in the past. Include detailed answers to the following questions: 1. What would be the likely impact on the government budget and national debt of the use of these fiscal policy tools (taxes, government expenditure, transfer payments, and interest rates)? 2. How would the use of these fiscal policy tools stabilize the economy?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter15: Monetary Policy

Section: Chapter Questions

Problem 2WNG

See similar textbooks

Similar questions

Which of the following is not correct? Question 3 options: By saving a larger portion of its GDP, a country can raise its output per worker. Savers supply their money to the financial system with the expectation that they will get it back with a return at a later date. Financial intermediaries are the only type of financial institution. The financial system helps match people’s saving with other people’s borrowing.
During the 2008-2011 financial crisis, two members of Congress proposed reinstituting the military draft as a solution to high unemployment, citing the experience of World War II. Would this have been a viable policy option? Discuss.
In Pakistan there is currently a pensions crisis because the government did not plan pensions of public sector employees efficiently. Instead of raising funds from lifetime earnings of employees, and giving pensionsas returns on savings, pensions currently require budgetary allocation in Pakistan, leading to financial burden on government. In developed countries like the US, where people plan their own pensions this planning for retirement requires a lot of effort, forward thinking and knowledge of financial opportunities. Even then pensions are never completely secure in the US.So, this system is not entirely suitable in Pakistan. Examine the Pension Crisis from perspective of Permanent Income Hypothesis and its modern versions to explain the possible causes of this crisis. Related to causes in part I suggest solutions to the pension crisis in Pakistan
On an average, real GDP per capita has grown at a much slower rate in USA than in Japan after the second world war. This is because of much lower levels of GDP per capita in USA than in Japan around the second world war time. Explain whether the given statement is true, false or uncertain. Start your answer by selecting one of the options – “True”, “False” or “Uncertain” and then provide arguments to justify your selection.
Question Two As an investment advisor, you have been requested to advise a client on whether he should invest his ten million dollars in Zambia or in South Africa. What key theory would you apply to advise the client on the short term and medium term implications of investing locally and abroad? The Government of Zambia has decided to pursue a dual mandate of price stability and economic growth in the conduct of monetary policy. Advise on the possibility of the country achieving both price stability and economic activity stability in the case of a temporary supply shock. Ensure to demonstrate this with the aid of the Aggregate Demand and Aggregate supply framework.
Explain in a few paragraphs why interest rates have recently been increased in Australia? Use economic theory and models.
Macroeconomics deals with the analysis of all of the following questions except Question 18 options: a) Why do nation’s grow? b) How does a central bank increase a nation’s money supply? c) Why does a country experience inflation d) How does Microsoft price its software packages?
For each of the following economic changes, predict what will happen to equilibrium interest rate and quantity of money in the financial market. Sketch a demand and supply diagram to support your answers. Banks that have made loans find that a larger number of people than they expected are not repaying those loans. 2.Because of the pandemic, people become uncertain about their economic future. 3. BSP buys dollars from the public to increase its foreign exchange reserves.
ECN 360Intermediate EconomicsCourse Information:This course focuses on microeconomic principles and techniques of analysis from the perspective of the firm and the study of the national economy. Topics include the costs of production, market structures, profit maximization, regulation and deregulation of business, labor markets, GDP and measures of economic well-being, national income accounting, the effects of business cycles, an overview of fiscal, monetary and supply side policies, and role of money, banks, and the Federal Reserves System in the United States.PrerequisitesECN 220Required Course Materials:•Schiller B. (2010), The economy today (12th ed.). McGraw-Hill. ISBN: 13:9780073375892 customized textbook using selected chapters only. •Refer to individual modules for other specific required readings and resources.•If you need help formatting assignments, go to the Writing Center in the Student Success Center, read the style guide, and use the templates for this…
Which of the following statements is correct? Question 24 options: A corporation receives a monetary payment every time its shares of stock are traded by stockholders on organized stock exchanges. When a corporation sells bonds as a means of raising funds it is engaging in debt finance. A share of stock is an IOU. The two most important financial markets in the economy are the stock market and financial intermediaries
which of the following is NOT correct with respect to the Efficient Market Hypothesis? If markets are semi-strong form efficient, then fundamental analysts would not be able to earn abnormally good returns, after considering the risk they assume Semi-strong form efficiency says that if a company announces a labor strike, the stock price very quickly adjusts downward Evidence suggests that markets are NOT strong form efficient, since insiders could make abnormally good returns trading on private information. However, that is illegal Semi-strong form efficiency says that when Stryker makes an earning announcement, the stock price quickly reflects the new information Weak form efficiency says that technical analysts who study charts of stock prices and volumes can regularly make abnormally good returns, after considering the risk the assume
Select economic problem occuring from an increase in the money supply and explain what happens.