Under conditions of a liquidity trap and interest-insensitive investment, Keynesians would be most likely to propose __________ policy to eliminate a recessionary gap. Group of answer choices contractionary fiscal restrictive monetary expansionary monetary expansionary fiscal

Q: As a result of an economic policy change, interest rates and consumption rise but investment falls.…

A: Fiscal and monetary policies are two main tools to correct the economic imbalances . Where expansion…

Q: Consider the IS-LM Investment and savings Liquidity and money preference model to represent the…

A: To protect people and firms along with sustaining the economy, the government adopts expansionary…

Q: Raising Government Spending is one of the bellow options? contractionary fiscal policy expansionary…

A: Definitions- Fiscal policy- The fiscal policy is the use of government revenue (taxes or tax cut)…

Q: When discussing timing difficulties of stabilization polices the referred. ................... to…

A: After a certain economic problem has been identified, it takes some amount of time for the…

Q: As discussed in the class, discretionary policies are the actions the administration takes in order…

A: The macroeconomic policies that are formulated in the wake of the changes in the economy, by the…

Q: Consider an economy facing a recessionary gap in the short-run.  Expansionary fiscal policy leads to…

A: Prices would be pushed up as a results of an excessive amount of spending. Employment would suffer…

Q: a)Using the short-hand symbols G, Y, Md, r and I to demonstrate the effects of an expansionary…

A: Hey, thank you for the question. Since there are multiple questions posted, we will answer first…

Q: The Laffer curve is a central component of O a) countercyclical monetary policy. O b) the new…

A: Answer: Laffer curve: Laffer curve shows the relationship between the tax rate and the tax revenue…

Q: When there is a problem of a delay in terms of implementation of the fiscal policy, that would be…

A: Execution tag- The period between the conclusion of one task and the beginning of a different…

Q: In the liquidity trap case where the LM schedule is nearly horizontal   a. both monetary and fiscal…

A: The monetary policy is completely ineffective because the demand for money is completely/ perfectly…

Q: The Reserve Bank faces pressure to begin tightening monetary policy as the cost of living continues…

A: In the IS-LM model, IS refers to Investment saving curve and LM refers to Liquidity of money curve.

Q: Assume that the economy is in a recessionary (deflationary) gap and there is unemployment of labour.…

A: New Classical approach Unanticipated policy changes are the only ones that cause changes in real…

Q: Match the following terms with their definitions.…

A: From the above information, we will match the following terms with their definitions-

Q: Advocates of fixed policy rules believe that   Discretionary policies can improve macro outcomes.…

A: Fixed policy rule refers to the situation when government officials beleives in some special set of…

Q: Determine whether the following items are examples of expansionary fiscal policy, contractionary…

A: As we all know that when talk comes about communist type of government, there is complete and…

Q: The following events have occurred in the history of the United States: A deep recession hits the…

A: Classical approach A recession is a phase which results into fall in the trading and industrialist…

Q: The monetary transmission mechanism can be depicted in the form of a graph or using symbols.   3,1…

A: The monetary transmission mechanism shows the ways through which monetary policy (MP) affects the…

Q: a. Which of the following are considered limitations of fiscal policy? Instructions: In order to…

A: In an economy, when any economic policy is implemented to deal with the market conditions, there are…

Q: a. Which statement best describes the classical fiscal policy prescription for a recession? Select…

A: Note:- Since we can only answer one question at a time, we'll answer the first one. Please repost…

Q: Addressing inflation using Fiscal and Monetary Policy tools. Scenario - The US economy is currently…

A: Inflation is a situation in the economy, when there is general rise in the price level of goods and…

Q: According to the traditional Keynesian analysis, if the government increases spending and pays for…

A: A government budget deficit occurs when government spending is greater than government tax revenue.…

Q: When the economy slows down heading towards a recession, then the appropriate monetary policy would…

A: During recession, the demand started to decline and unemployment started rising. Monetary policy is…

Q: To fix a negative supply shock in an economy, ___________should be used.   a.  contractionary…

A: The economies around the globe are focused on maximizing the level of their growth, and development.…

Q: Question 8 Fiscal policy is: a change in the money policy to solve domestic problems. the use of…

A: Answer 8.  The way the central government generates money through taxation and spends it is…

Q: Which of the following statements is false?     It might sometimes make sense for a government to…

A: Monetary Policy helps to obtain price stability, full employment, and economic growth whereas Fiscal…

Q: Prepare a mathematical presentation to show the relationship between the output and policy rate. -…

A: Aggregate expenditure: Aggregate expenditure (AE) is the current value of all the final goods and…

Q: When the demand for money as a medium of exchange is high, the impact of fiscal policy on aggregate…

A: In economics, crowding out is a peculiarity that happens when expanded government association in an…

Q: The idea of policy making taking place in response to a predetermined set of rules is referred to as…

A: A policy that is based on a predetermined set of rules is called passive policy. In Passive fiscal…

Q: Monetary policy is subject to longer​ ________ lags than fiscal policy. A. Decision and​…

A: The time it takes for the government and central bank to react to an adverse macroeconomic event…

Q: Explain the difference between fiscal policy and monetary policy. Explain also 2 advantages and 2…

A: Macroeconomics is a branch of economics which studies the economy as a whole while considering…

Q: Which of the following policies in pro-cyclical? Select one: a. The Fed sells government bonds in an…

A: Pro-cyclical policies are the tendency of financial variables to change and fluctuate during the…

Q: If aggregate demand shifts left and the President and Congress want to use fiscal policy to reverse…

A: Aggregate demand measures the total demand of goods and services in an economy. The aggregate demand…

Q: the following statements is/are true? Group of answer choices Inside Lag for Fiscal Policy is much…

A: Outside lag is the time required for policy change to affect the economy. Does it include variables…

Q: Which of the following economic schools of thought promote the use of fiscal policies to stimulate…

A: Classicals believed that no government intervention is necessary and market adjusts itself.…

Q: As per the additional reading “What should be the Fed’s response to Stagflation”, all the following…

A: In an economy, stagflation is considered as a bad situation because high unemployment and high…

Q: When government spending results in higher interest rates due to rising debt, what happens to…

A: The Gross Domestic Product (GDP) refers to the market value of all the final goods and services…

Q: Explain by means of aggregate demand equation and IS-LM model graphs the concept behind Fiscal…

A: The policy makers are the decision making authorities, which makes decisions regarding which…

Q: The rational expectations theory suggests that as the public learns more about the effects of fiscal…

A: Rational expectation theory suggests the economic agents have full information about the economy,…

Q: Draw a correctly labeled AD/AS graph and a correctly labeled Phillips curve graph showing an economy…

A: Note: Since you have posted a question with multiple sub-parts, we will solve the first three…

Q: Assume that the economy begins in long-run equilibrium and that the federal reserve decides to use…

A: When federal reserve decides to sell bonds in open market then it will decrease the money supply in…

Q: Which of these are advantages of monetary policy relative to fiscal policy? Select all correct…

A: Monetary policy  Monetary policy is a mechanism used by a country's central bank to influence the…

Q: When the government or the central bank conduct expansionary fiscal or monetary policy, the…

A: Suppose, in an economy, the government implements expansionary fiscal policy in which government…