Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971509
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 21, Problem 4QR
To determine
Pessimism and aggregate demand .
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Suppose that survey measures of consumer confidence indicates a wave of pressimism is sweeping the country. If policy maker do nothing, what will happen to aggregate demand? What should the fed do of it wants to stabilize the aggregate demand? If fed does nothing then what congress should do to stabilize the aggregate demand?
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?
Suppose there is an increase in aggregate demand. If the fed want to
Chapter 21 Solutions
Principles of Macroeconomics (MindTap Course List)
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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.arrow_forwardA stimulative monetary or fiscal action should increase aggregate demand. What factors may limit the actual increase in aggregate demand?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: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.arrow_forward
- Explain what types of policies the federal government may have implemented to restore aggregate demand and the potential obstacles policymakers may have encountered.arrow_forwardIf aggregate supply is increasing at 2.5 percent a year and aggregate demand is expanding 4 percent per year, what will happen to the overall price level? What action would you anticipate from the Federal Reserve?arrow_forwardWhat happens to the aggregate demand curve when the Fed reduces the money supplyarrow_forward
- Suppose that government spending is increased at the same time when an autonomous monetary policy tightening occurs. What will happen to the position of the aggregate demand curve?arrow_forwardSuppose that survey measures of consumer confidence indicate a wave of pessimism is sweeping the country. If policymakers do nothing, what will happen to aggregate demand? What should the Fed do if it wants to stabilize aggregate demand? If the Fed does nothing, what might Congress do to stabilize aggregate demand? Please give me answer in detail as soon as possible plaese dont reject it plaesearrow_forwardWhat effect will a successful supply-side policy have on the aggregate demand curve? A) Leftward shift B) Rightward shift C) Movement down along D) Movement up alongarrow_forward
- Which of the following will cause a decrease in aggregate demand? A) Increase in government spending B) Decrease in discount rate C) Increase in taxes D) the FED buying government securities from the publicarrow_forwardRecently, some members of Congress have proposed a law that would make price stability the sole goal of monetary policy. Suppose such a law were passed. How would the Fed respond to an event that contracted aggregate demand? How would the Fed respond to an event that caused an adverse shift in short-run aggregate supply? In each case, is there another monetary policy that would lead to greater stability in output?arrow_forwardExplain the likely effects of a U.S. boom on the demand for Canadian exports. What would be the effect on Canadian aggregate demand? Suppose the Bank of Canada viewed its monetary policy as being appropriate for keeping GDP of Canada close to potential GDP. What would you then predict to be the Central Bank's response to the foreign boom in U.S.?arrow_forward
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