Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Chapter 16, Problem 2QQ
To determine
Identify the lag.
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An 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.
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 spending
I. Identification__________1. Shows combination of interest rates and the levels of output such that planned spending equals income.__________2. Monetary policy characterized by a decrease in money supply that results to a higher interest rate.__________3. Shows all combinations of interest rates and levels of income such that the demand for real balances is equal to the supply.__________4. It occurs when expansionary fiscal policy causes interest rates to rise, thereby reducing private spending, particularly investment.__________5. A policy on the regulation of the supply of money in the circulation.__________6. The policy of the government with regard to the level of government purchases, the level of transfers and the tax structures.II. Modified TRUE or FALSE: Write TRUE if the statement is correct and if the statement is false, choose the word or group of words that makes the statement false and write the correct word or group of words to make the statement correct.1. The lower the…
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- Which of the following is accurate? Select one: a. Monetary policy is neutral in both the short run and the long run. b. Monetary policy has profound effects on real variables in the long run, but is neutral in the short run. c. Monetary policy has profound effects on real variables in both the short run and the long run. d. Though monetary policy is neutral in the long run, it may have effects real variables in the short run.arrow_forwardYou read the following headline in the newspaper: "Lower tax rates have led to an increase in housing starts." Please assess if (a) this is fiscal or monetary policy (b) the policy is contractionary or expansionary (c) GDP will increase or decrease (d) Unemployment will increase or decrease This is blank1 - Word Answer Write your response here... (fiscal/monetary) policy. This policy is blank2 - Word Answer Write your response here... (expansionary/contractionary). It will lead to a(n) blank3 - Word Answer Write your response here... (increase/decrease) of GDP while unemployment will tend to blank4 - Word Answer Write your response here... (increase/decrease).arrow_forwardAs you have learned in Unit 8 (this week), monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard: a. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? b. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? c. What specific fiscal policy tools would you use to stimulate aggregate demand and how? d. What specific monetary policy tools would you use to stimulate aggregate demand and how? e. What is your conclusion, should policymakers use the monetary and or fiscal policy to stimulate aggregate demand? Explain briefly.arrow_forward
- *Does monetary or fiscal policy have a longer time lag? Why?arrow_forwarda. Explain what happens to Money Demand when each of the following occurs: i. incomes rise; ii. the interest rate rises. b. Use the money market to explain why the aggregate demand curve slopes downward. Pa... + ...arrow_forwardShould policymakers use monetary policy, fiscal policy, or both 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 lessen economic fluctuations. NOTE: make sure to ADJUST GRAPH to the proper formatiom! NOTE: options for blanks 1. According to the graph, this economy is in ______ (a recession OR an expansion) 2. natural rate of output, the government could use ______ (an expansionary OR a contractionary) monetary policy such as _____ (decreasing taxes OR increasing taxes) 3. __________(leave the economy unchanged OR increase the long run capacoty to produce goods and services OR push the economy beyond the natural rate of output OR fall short of the natural rate of output) once the effects of the policy are fully realized.arrow_forward
- Please help Fill in the blanks.arrow_forwarda) Explain what happens to Money Demand when each of the following occurs: i, incomes rise; ii. the interest rate rises. b. Use the money market to explain why the aggregate demand curve slopes downward.arrow_forwardDiop, Mame esign Layout References Mailings Review View Help 14.) 2020 was year the COVID-19 global pandemic. Specifically explain how both monetary and fiscal policy have been used in the United States as a reaction to date.arrow_forward
- Using a correctly labelled aggregate demand and aggregate supply diagram, show how the increase in investment will affect each ofthe following in the short run.i. Output ii. The price level c. Identify one fiscal policy action that could counter the increase in investment. Explain how this policy will affect each of the following.i. Output ii. The price level iii. Nominal interest rates d. i. Identify one monetary policy action that could counter the increase in investmentsii. Using a correctly labelled money market graph, show how this policywill affect nominal interest ratesarrow_forwardYou have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible. 1. What is the fed trying to do?A. slow down the economyB. stimulate the economyC. remains unchanged 2. How is the fed doing it?A. buying bondsB. selling bondsC. remains unchanged 3. What happens to bond prices?A. increaseB. decreaseC. remains unchanged 4. What happens to the interest rate?A. increaseB. decreaseC. remains unchangedarrow_forwardAn increase in interest rates by the Federal Reserve is an example of _______ policy. Multiple Choice a. aggregation b. structural c. monetary d. fiscalarrow_forward
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