Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 18, Problem 1PA
Subpart (a):
To determine
Natural restorative powers of the economy.
Subpart (b):
To determine
Natural restorative powers of the economy.
Subpart (c):
To determine
Natural restorative powers of the economy.
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Start with a brief introduction that explains use of Government policy to control the economy.
When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.
When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.
What specific fiscal policy tools would you use to stimulate aggregate demand and how?
What specific monetary policy tools would you use to stimulate aggregate demand and how?
What is your conclusion, should policymakers use the monetary and or fiscal policy, or a combination of both, to stimulate aggregate demand? Explain your reasoning.
Suppose that consumers become pessimistic about the future health of the economy. What will happen to aggregate demand and to output? What might the president and Congress have to do to keep output stable? What might the Federal Reserve do?
What type of policy are this using (expansionary or contractionary)? How will it impact unemployment, GDP, inflation? How will it impact aggregate supply and demand? Will these changes harm our economy? Are they worth it?
Chapter 18 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
Ch. 18.1 - Prob. 1QQCh. 18.2 - Prob. 2QQCh. 18.3 - Prob. 3QQCh. 18.4 - Prob. 4QQCh. 18.5 - Prob. 5QQCh. 18.6 - Prob. 6QQCh. 18 - Prob. 1CQQCh. 18 - Prob. 2CQQCh. 18 - Prob. 3CQQCh. 18 - Prob. 4CQQ
Ch. 18 - Prob. 5CQQCh. 18 - Prob. 6CQQCh. 18 - Prob. 1QRCh. 18 - Prob. 2QRCh. 18 - Prob. 3QRCh. 18 - Prob. 4QRCh. 18 - Prob. 5QRCh. 18 - Prob. 6QRCh. 18 - Prob. 7QRCh. 18 - Prob. 8QRCh. 18 - Prob. 9QRCh. 18 - Prob. 10QRCh. 18 - Prob. 1PACh. 18 - Prob. 2PACh. 18 - Prob. 3PACh. 18 - Prob. 4PACh. 18 - Prob. 5PACh. 18 - Prob. 6PACh. 18 - Prob. 7PACh. 18 - Prob. 8PA
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- According to mainstream economists, what is the usual cause of macroeconomic instability? What role does the spending-income multiplier play in creating instability? How might adverse aggregate supply factors cause instability, according to mainstream economists?arrow_forwardIn an effort to stabilize the economy, is it best for policymarkers to use monetary policy, fiscal policy, or a combination of both? The following questions address the ways monetary and fiscal policies impact the economy and the pros and cons associated with using these tools to ease 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 economy in May 2025. According to the graph, this economy is in (a recession/an expansion) . To bring the economy back to the natural level of output, the government could use (an expansionary/a contractionary) monetary or fiscal policy such as (decreasing taxes/increasing taxes). Shift the appropriate curve on the following graph to illustrate the effects of the policy you chose. Suppose that in May 2025, policymakers undertake the type of policy that is necessary to bring the economy back to the natural…arrow_forwardWhich of the following statements are FALSE? (a) When the government prints money to buy goods and services the resulting inflation is a form of tax, since people will not have to pay more for their goods and services than before. (b) An effective fiscal policy macroeconomic stimulus should aim to replace private spending with public (government) spending. (c) To be effective a fiscal policy macroeconomic stimulus should have temporary increases in spending and permanent tax cuts. (d) The paradox of thrift is that the increase in saving during a recession because people postpone major purposes prolongs the recession and thus is not good for the economy, while normally saving grows the economy.arrow_forward
- Most economists agree that individual consumers and business cannot pull the economy out of a severe recession without help from either the government or the Federal Reserve. Which group(s) believe fiscal policy is ineffective: Keynesians or Monetarists? Briefly explain the answer. Which group(s) believe monetary policy is ineffective in the short run: Keynesians or Monetarists? Briefly explain the answer. Which group(s) believe monetary policy is ineffective in the long run: Keynesians or Monetarists? Briefly explain the answer.arrow_forwardUsing the AD/AS model construct two graphs that show how a recession can occur? Explain how discretionary fiscal or monetary policies can be used to moved the economy out of recession?arrow_forwardAssume the economy has entered a recession. Identify two fiscal and two monetary policy actions that could be used to alleviate the recession and explain how each policy would improve the economy.arrow_forward
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