Explain the economic policy that will stabilize the economy and achieve
Explanation of Solution
The role of the government and the central bank is necessary to stabilize the economy and achieve economic growth. If an economy faces recession, considering the role of the government, the government would adopt an expansionary fiscal policy to stimulate the economic activity. The tools of the expansionary fiscal policy are government spending and cut-down tax rate. Alternatively, if the economy faces inflation, the government would reduce lending and increase the tax rate. In case of the central bank, they adopt expansionary
Expansionary fiscal policy: Expansionary fiscal policy increases the government purchases and decreases the taxes to increase the aggregate demand and expanding output.
Contractionary fiscal policy: Contractionary fiscal policy is a fiscal policy of the government in which the government spending decreases and the tax increases.
Expansionary monetary policy: Expansionary monetary policy is a central bank policy that stimulates the economy by decreasing the interest rate, reducing the reserve requirement, and increasing the money supply.
Contractionary monetary policy: Contractionary monetary policy is a monetary policy that is implemented by the central bank to ensure price stability by targeting the interest rate, which is a reduction in the money supply and an increase in the interest rate.
Want to see more full solutions like this?
Chapter 15 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
- What common rule of thumb do economists use to define a recession? A decline of 5% in GDP A decline of 10% in GDP One quarter of negative GDP growth Two quarters (six months)of negative GDP growtharrow_forwardShow graphically how an increase in household confidence about future income affects the loanable funds market. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardA change from E 1 to E 2 is most likely to result from: A decrease in consumer incomes An increase in the wages of chicken workers An increase in the price of beef products Improved technology in the chicken industryarrow_forward
- Global warming has a negative impact on the entire world, but policymakers hesitate to make changes due to the possible effect on the economy. How could new energy policies impact the economy? All global warming policies will be equally funded by all countries. New energy policies can be very costly, and these costs would be passed onto people and businesses. New energy policies would secure all jobs in the energy market. New energy policies are inexpensive and can be implemented easily.arrow_forwardResearch past recessions in the US economy. Analyze why the recessions occurred, the societal and economic impact of the recessions, and what policies were implemented due to recessions.arrow_forwardTrue/False A government in economy usually work for the welfare of the people.arrow_forward
- Propose THREE solutions that you think might assist policymakers and internal or external stakeholders to recover the economy due to the COVID-19 pandemic.arrow_forwardMany economic policies fail because Measurement difficulties prevent policymakers from correctly identifying what is happening in the economy. Forecasts are usually inaccurate. There are time lags in response to policies. Political objectives often conflict with good economic policies. All of the answers are correct.arrow_forwardMacroevolution price demandarrow_forward
- six (6) strategies that the Minister of Finance could implement to reduce the consequences of the recession on the labour market in South Africa.arrow_forwardIn 2010 the Greek government had to inform the European Commission on how it would control its budget deficit and improve the performance of its economy. The government’s debt is so high that agencies assessing the creditworthiness of the government downgraded it (which would mean more interest has to be paid to raise finance). Proposals were likely to include a 10% cut in government spending. Questions What actions can the government take to increase national income growth in Greece? If the Greek economy is in recession what would you expect to be the effect on: a) Inflation? b) Unemployment? c) Imports? Explain your answers.arrow_forwardCanadian real GDP unexpectedly accelerated to a 4.5 percent pace in the second quarter of 2017. This faster-than-expected growth was the fastest among Group of Seven countries. It was led by the biggest rise in household spending since before the 2008–2009 global recession.How would an unexpected increase in the economic growth rate influence federal government outlays? Federal government outlays would ______ because ______ .A. decrease; government expenditure on goods and services would fallB. decrease; transfer payments such as unemployment benefits would fallC. increase; debt interest would increaseD. not change; the economic growth rate doesn't influence federal government outlays How would an unexpected increase in the economic growth rate influence federal government revenues? Federal government revenues would ______ because ______ .A. not change; the economic growth rate doesn't influence federal government revenuesB. increase; taxable incomes would rise and tax…arrow_forward
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
