EBK BRIEF PRINCIPLES OF MACROECONOMICS
7th Edition
ISBN: 9780100469884
Author: Mankiw
Publisher: YUZU
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Chapter 12, Problem 4QCMC
To determine
Cause of hyperinflation.
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f Congress and the president decide an expansionary fiscal policy is necessary, then they should target higher interest rates by decreasing the money supply. enact policies that increase government spending and decrease taxes. Oenact policies that decrease government spending and increase taxes. O target lower interest rates by increasing the money supply. 2001-20
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Hyperinflation occurs when the government runsa large budget _________, which the central bankfinances with a substantial monetary _________.a. deficit; contractionb. deficit; expansionc. surplus; contractiond. surplus; expansion
An "inflation tax" is often associated with
a
a speculative real estate boom.
the higher interest rates and reduced investment
spending that result from the Government financing its
deficit in financial markets.
the excessive printing of money to finance a budget
deficit.
the increased taxes required to pay off the public debt
which crowd out household spending by reducing
disposable personal income.
d.
Chapter 12 Solutions
EBK BRIEF PRINCIPLES OF MACROECONOMICS
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- Expansionary fiscal policy will ________GDP and ________ inflation. a. raise,lower b. lower,lower c. lower,raise d. raise,raisearrow_forwardGovernment stabilization policy a. can stimulate aggregate demand, but only in the long run. b. can stimulate aggregate demand and thereby induce businesses to invest, but the amount is not totally predictable. c. can stimulate aggregate demand, but investment spending will not be affected. d. cannot influence investment spendingarrow_forwardIn the United States, the various state governments almost all have laws that require them to balance their budgets, every single year. Such a law would require them to ___during a ____ , resulting in a ____ recession. recession ,boom ,bigger, smaller, decrease taxes, increase taxesarrow_forward
- The economy goes into recession. Which of the following lists contains things policymakers could do to try to end the recession? a. Increase the money supply, increase taxes, decrease government spending b. Decrease the money supply, increase taxes, decrease government spending c. Increase the money supply, increase taxes, increase government spending d. Increase the money supply, decrease taxes, increase government spendingarrow_forwardIn the short run, a rise in the federal funds rate ________ the price level and ________ real GDP. a. lowers; decreases b. lowers; does not change c. lowers; increases d. does not change; increasesarrow_forwardUganda 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_forward
- When the government increases spending (expansionary fiscal policy), inflation and employment are MOST LIKELY to change in which of the following ways? Inflation Level Unemployment Decrease, Increase Decrease, Decrease Increase, Decrease O Increase, Increasearrow_forwardB. Move the Economy back to Potential GDP C. Do nothing D. Decrease Inflation, Lower Interest Rates, Increase Spending 33. If an Economy is producing below Potential GDP, the correct form of action is: A. Expansionary Monetary Policy combined with Contractionary Fiscal Policy B. Contractionary Monetary Policy combined with Expansionary Fiscal Policy C. Expansionary Monetary Policy or Expansionary Contractionary Policy or some Combination of both D. Contractionary Monetary and Fiscal Policy in the Same Amounts xt Predictions: On Editor Suggestions: Showing Et P + 51°arrow_forwardAn increase in taxes would be a good policy A. when there is stagflation, as this policy would push aggregate supply to the right. B. during a recession, as this policy would stimulate aggregate demand. C. during a recession, as this policy would reduce aggregate supply. D. when there is inflation, as this policy would push aggregate demand to the left. E. when there is inflation, as this policy would push aggregate demand to the right. QUESTION 20 An increase in the price level will A. shift the aggregate demand curve to the left. B. shift the aggregate supply curve to the left. C. move the economy down along a stationary aggregate supply curve. D. shift the aggregate demand curve to the right. E. move the economy up along a stationary aggregate demand curve.arrow_forward
- The government runs a large budget deficit and the central bank conducts OMO purchase to buy the debt back: a)Inflation increases b)Inflation decreases c)Inflation stays the same d)Can't tellarrow_forward18. 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.arrow_forward1. Increasing government spending when the economy is in a recession is an example of: A. active monetary policy B. active fiscal policy C. passive monetary policy D. passive fiscal policy 2. Because monetary and fiscal lags are long and variable: A. stronger policies must be used B. successful stabilization policy is completely impossible C. attempts to stabilize the economy are often destabilizing D. policy must be completely passivearrow_forward
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