Which of the following is an appropriate fiscal policy response if the economy is in a state of rising inflation?   Contractionary fiscal policy by decreasing government spending and taxes. Expansionary fiscal policy by increasing government spending and taxes. Contractionary fiscal policy by decreasing government spending and increasing taxes. Expansionary fiscal policy by increasing government spending and lowering taxes.

Q: Automatic stabilizers:     A)  counteract both recessions and expansions through changes in…

A: Automatic stabilizers are part of the government budget that offsets fluctuations in aggregate…

Q: The change in aggregate demand that results from fiscal expansion changing the interest rate is…

A: Crowding out Effect states that government spending is increased in order to balance the reduction…

Q: Expansionary fiscal policy occurs when the government decreases spending or increases taxes to…

A: Fiscal policy is the tool used by government to control the economy.

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

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

Q: Given that the full employment output is $2,500 and the equilibrium real GDP is $2,800, and the MPS…

A: Tax multiplier: - it is a fraction that shows the magnitude of the change in national income due to…

Q: The US government has recently announced and started to implement a large-scale fiscal expansion to…

A: To boost the economy from the pandemic affect US fiscal stimulus which means using Expansionary…

Q: 55)If the real GDP and Price level both decreased, the following must have occurred: Select one: a.…

A: In contractionary fiscal policy, the government cut down the expenditure or increases the tax. A…

Q: _____ are elements of fiscal policy that automatically change when income changes.   a. Budget…

A: Fiscal policy is one of the tools of the government to influence macroeconomic conditions such as…

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: Which of the following is NOT an automatic stabilizer?     income taxes   transfers for welfare…

A: As the name suggests itself Automatic stabilizers can be defined as the tool of fiscal policy which…

Q: According to the supply side fiscal policy, increasing tax rates on wages will: Group of answer…

A: When there is increase in wages, there is increase in cost of production.

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: Which of the following is NOT a fiscal policy action? Group of answer choices decreasing government…

A: Fiscal policy is used by governments that have an economic influence. Changes in taxation and…

Q: Which of the following statements about how fiscal policy should most appropriately be used in a…

A: The fiscal and monetary policies are used by the governments to achieve certain economic goals. The…

Q: Label each of the following scenarios in which there are problems enacting and applying fiscal…

A: Fiscal policy can be used by the government in order to stabilize the economy. Primarily in fiscal…

Q: 3. Automatic stabilizers: Group of answer choices work without the need for decisions from Congress…

A: An automatic stabilizer implies the market forces that act automatically in the market to correct…

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: Use the aggregate expenditures model to show how government fiscal policy could eliminate either a…

A: Meaning of Aggregate Demand and Aggregate Supply: The term aggregate demand refers to the…

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: Assume that the economy is facing a GDP gap. 1. Write a report explaining why that might have…

A: There are two types of GDP gaps i.e. rrecessionary output gap and the inflationary output gap. In…

Q: If the government increased spending by $8 million as part of expansionary fiscal policy, calculate…

A: MPC is the marginal propensity to consume, which is the proportion of change in income spent on…

Q: Which statement below is NOT true regarding government intervention in the economy? Progressive…

A: Role of government in the economy has been important since the Keynesian revolution of 1930s, which…

Q: Government spending on unemployment benefits, welfare, Medicare, and other programs during a…

A: Recession: It is an economic situation where the aggregate demand in the economy falls causing the…

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: Explain the impact of a tax cut on income, the interest rate and money demand in the IS-LM model.…

A: Fiscal policy is the process through which a government adjusts its tax rates and levels in order to…

Q: Describe the roles of government bodies that determine fiscal policy. Explain fiscal policies’…

A: The role of government bodies that determine fiscal policy are as follows: The government fiscal…

Q: In order to boost the economy, the government should implement expansionary fiscal policy by…

A: Fiscal policy is the tool used by government to achieve the objectives of economy such as economic…

Q: Identify one fiscal policy action that could counter the effects identified in part (a). Explain how…

A: The AD-AS models are one of the most important Keynesian proposition which results in the…

Q: Use the aggerate demand and aggerate supply model to analyze the impact on the following scenarios…

A: AD and AS are aggregate demand and aggregate supply respectively which help to determine the price…

Q: The government has many tools at its disposal to help create stability for an economy. Explain the…

A: The use of government spending and taxation for influencing the economy is known as fiscal policy.…

Q: Match each of the following with the appropriate Fiscal Policy Should be used when Unemployment is…

A: In an economy, governement uses contractionary fiscal policy when it wants to decrease income level…

Q: Evaluate the effectiveness of fiscal policy as a tool to reduce unemployment.

A: Fiscal policy is a policy used by the government in which it influences the level of government…

Q: Which of the following is not an automatic​ stabilizer?     A. Unemployment compensation.   B.…

A: Answer: Correct option: (B) Defense spending. Explanation: Automatic stabilizers are the components…

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: Which of the following is an expansionary fiscal policy? increase in taxes only both increase in…

A: Fiscal policy is the term used to describe how the government uses spending and taxation to affect…

Q: Suppose the MPC = 0.8 and the government increases spending by P100 billion, financing this spending…

A: MPC = 0.8 -------- Government spending multiplier = 1 / (1 -MPC) => Government spending…

Q: Identify one fiscal policy action that could counter the increase in investments. Explain how this…

A: Fiscal policies are actions taken by the government to stabilize the economy. The policies include…

Q: A. Comment on the statement: “Increasing government spending is preferred to a cut in taxes when the…

A: Basic economic analysis shows that increased government spending would be simpler in stimulating the…

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: Counter-cyclical fiscal policy and monetary policy is meant to     increase long-run trend GDP…

A: Countercyclical fiscal and monetary policy is the one which tries to change the direction of the…