Econ Macro (book Only)
6th Edition
ISBN: 9781337408745
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 11, Problem 13P
To determine
Impact of stimulus program during recession period.
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COURSE: MACROECONOMICS - FISCAL BALANCE
The government of country X, faced with a fiscal deficit, proposes an increase in public spending (G) but which further increases the country's public debt. To justify this action the president argues that they are seeking to boost the economy which will increase the country's GDP allowing to collect significantly more money than initially spent, finally improving the situation of the fiscal coffers. Is this statement correct? Does the government have knowledge of economics?
9.
The lag associated with fiscal policy can:
magnify economic fluctuations.
stimulate output beyond full employment.
depress output below full employment.
all of the above.
18. What happens when the government temporarily runs a deficit by spending more on public stimulus without raising taxes?
A. The aggregate demand curve moves to the right.
B. The aggregate supply curve will shift to the right but only in the short run.
C. The aggregate demand curve moves to the left.
D. The aggregate supply curve will shift to the right but only in the long run.
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- 5. Expansionary fiscal policy shifts the: the aggregate demand curve to the left. the short run aggregate supply curve to the right. the short run aggregate supply curve to the left. the aggregate demand curve to the right.arrow_forwardThe Government and Fiscal Policy (chapter 16) If inflation is a major issue in the economy, what would be the correct fiscal policy response from an economic perspective? Why would members of Congress be unlikely to support such actions? Note: please do not give a copy & paste answer from Chegg. or course heroarrow_forward6. (Fiscal Policy) Was fiscal policy effective when the U.S. economy was experiencing stagflation during the 1970s? Why or why not?arrow_forward
- 1 When the federal government uses taxation and spending actions to stimulate the economy it is conducting fiscal policy incomes policy monetary policy employment policy 2 Refer to the graph. What combination would most likely cause a shift from AD1 to AD3? Increases in taxes and government spending Decrease in taxes and increase in government spending Increase in taxes and decrease in government spending Decreases in taxes and government spendingarrow_forward7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy and the pros and cons of using these tools to combat economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in April 2023. Suppose the government decides to intervene to bring the economy back to the natural level of output by using (FILL IN THE BLANK) policy. Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output.arrow_forward10) Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, high rates of economic growth, and high employment. A) taxes; interest rates B) taxes; expenditures C) interest rates; money supply D) taxes; money supplyarrow_forward
- 7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, and the pros and cons of using these tools to combat economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in May 2023. Suppose the government decides to intervene to bring the economy back to the natural level of output by using a ____________(contractionary policy/expansionary policy). Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output. Suppose that in May the government undertakes the type of policy that is necessary to bring the economy back to the…arrow_forward7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, and the pros and cons of using these tools to combat economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in May 2023. Suppose the government decides to intervene to bring the economy back to the natural level of output by using policy.arrow_forward9.Fiscal policy can be called on to correct conditions of recession and inflation. a.List and explain the 3 tools of Fiscal Policy that would be appropriate for addressing recession and explain in detail how each would ultimately impact aggregate demand and equilibrium GDP. Be specific! Please consider transfer payments as part of government spending. You would want to list and explain the 3 tools and how each (step by step) would affect AD and equilibrium gdp. b. List the 3 tools of Fiscal Policy that would be appropriate for addressing inflation and explain in detail how each would ultimately impact aggregate demand and equilibrium GDP. Be specific! You would want to list and explain the 3 tools and how each (step by step) would affect AD and equilibrium gdp.arrow_forward
- Uganda has an unstable macroeconomic situation and the government has decided to increase its spending to impose an expansionary fiscal policy. What effect it would have on the following; 1. Aggregate Demand and Supply 2. Price level and Output 3. Labour Market 4. Money Market Illustrate with the help of graph and step by step effect.arrow_forward38) The UK Labour government was forced to abandon its 'golden rule' in 2008/9 because A) the fiscal multiplier was not working. B) the EU declared that it was not compatible with the Stability and Growth Pact. C) it wished to pursue discretionary fiscal policy to tackle the recession. D) it had to increase taxes to tackle the rise in the budget deficit.arrow_forward20)Using the short-hand symbols G, Y, Md, r and I to demonstrate the effects of an expansionary fiscal policy.arrow_forward
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