Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN: 9781285165912
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 17, Problem 4QCMC
To determine
Cause of hyperinflation.
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Students have asked these similar questions
"Inflation tax" means that:
Select one:
a. as the price level rises, taxpayers are pushed into higher tax brackets.
b. as the price level rises, the real value of money held by the public decreases.
c. as taxes increase, the rate of inflation also increases.
d. in a hyperinflation, the chief source of tax revenue is often the printing of money.
What's wrong with this way of thinking? "When the government runs a budget deficit, it simply pays its bills by printing more money. As the newly printed money works its way through the economy, it waters down the value of paper money already in circulation. Thus, it takes more money to buy things. Budget deficits are the major cause of inflation."
List and explain the 3 Fiscal Policy tools that reduce inflation (Decrease government spending, Tax Increase, and Combination of the Two) and indicate how each tool is used to attack the inflation problem?
Chapter 17 Solutions
Principles of Macroeconomics (MindTap Course List)
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- a. What are the fiscal policy tools the government can use to expand an economy that is in a recession? Explain the interaction between monetary and fiscal policy?b. Explain how monetary policy is expected to affect investment and aggregate expenditure and discuss its connection with interest rates and output?arrow_forward10.2 In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment?Explain. a)When the investment accelarator is large or when it is small? 11.1 Explain how each of the following developments would effect the supply of money,the demand for maoney, and the interest rate.Illustrate your answers with diagrams. e)A wave of optimism boosts business investment and exapands aggregate demand.arrow_forwardThe economy is experiencing rapid inflation, pushing above 9%. Which fiscal policy action should the government implement in an attempt to fix this problem?   A.) decrease interest rates B.) raise taxes C.) increase spending D.) increase reserve requirementsarrow_forward
- One of the fiscal measures of dealing with inflation is: a. Implement a budget surplus b. Operate a budget deficit c. Increase the rate of interest d. Operate a balance budgetarrow_forwardPlease answer all question, it's really matter. ( not very long, just short understandable answers) 1. Does the US currently rely more on fiscal policy or monetary policy to stabilize the economy? 2. Does fiscal policy have an expansionary bias? explain 3. Does fiscal policy have an expansionary bias?arrow_forwardThe table above shows Econland’s economy aggregate demand and aggregate supply schedules. Econland’s potential GDP is $400 billion. (4). Does Econland have an inflationary gap or a recessionary gap? (5). What is the size of the gap? (6). What specific fiscal policy would you prescribe to close the gap? (7). What specific monetary policy would you prescribe to close the gap?arrow_forward
- .......... can be stopped with .......... policy changes that remove the need for .......... (QUESTİON MAY HAVE MORE THAN ONE CORRECT ANSWER.) a.Seigniorage / monetary / borrowing in the open market b. Hyperinflations / fiscal/printing large quantities of money c.printing large quantities of money / monetary / taxes d.Hyperinflations / fiscal / seigniorage e.Open market operations / new tax / selling gold.arrow_forwardIf the U.S. government's budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then: a) government borrowing is likely to crowd out private investment. b) an inflationary increase in the price level is in real danger. c) the central bank might react with an expansionary monetary policy. d) higher interest rates will crowd out private investment.arrow_forwardHow does high inflation lead to a recession in the country? Explain the role ofthe Government and the Central Bank to address the economic recessionproblem by using appropriate fiscal and monetary policies. Are there anypotential problems with such policies? The answer needs to include graphs for fiscal and monetary policies and inflation and recession. Needs talking about circular flow of income and aggregate supply and demandarrow_forward
- 13. When the government uses its overdraft facilities at the central bank, it ___________ the quantity of moneyin the economy. This is called ___________________ financing. A Increases; deflationaryB Decreases; inflationaryC Decreases; deflationaryD Increases; inflationaryarrow_forwardTo increase the nominal money supply, the government can a) engage in open market sales of interest-bearing debt b) Use a helicopter drop c) increase deposit insurance for banks d) temporarily increase government spending, funded by an increase in either taxes or the quantity of government bonds. e) increase in government spending and taxes by same amountarrow_forwardplease answer all question, it's really matter ( not very long, just short understandable answers) 1. What are the roles for fiscal policy that might be less effective if left to monetary policy? 2. What are some clear advantages of monetary policy over fiscal policy? 3. Why did it take so long for the US government to adopt effective use of monetary policy?arrow_forward
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