Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
Textbook Question
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Chapter 30, Problem 53P

Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer:

  1. A recession.
  2. A stock market collapse that hurts consumer and business confidence.
  3. Extremely rapid growth of exports.
  4. Rising inflation.
  5. A rise in the natural rate of unemployment.
  6. A rise in oil prices.

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For each of the following fiscal policy proposals, determine whether the primary focus is on aggregate demand or aggregate supply or both: i. $1,000 per person tax reduction ii. a 5% reduction in all tax rates iii. Pell Grants, which are government subsidies for college education iv. government-sponsored prizes for new scientific discoveries v. an increase in unemployment compensation (i) both; (ii) supply-side; (iii) supply-side; (iv) both; (v) demand-side (i) demand-side; (ii) both; (iii) supply-side; (iv) supply-side; (v) both (i) demand-side; (ii) both; (iii) both; (iv) supply-side; (v) demand-side (i) supply-side; (ii) demand-side; (iii) demand-side; (iv) both; (v) both (i) supply-side; (ii) supply-side; (iii) demand-side; (iv) both; (v) both
Right now many economies in the world are experiencing a downturn due to the Corona Virus.a) What kind of fiscal policy can governments use to address the decline? b) What actions will be taken by the government in implementing the fiscal policy that you described in part a? c) What will be the effect on Aggregate Demand (if any) as a result of the actions taken in part b?d) What will be the effect on Aggregate Supply (if any) as a result of the actions taken in part b?
Evaluate the effectiveness of fiscal policy as a tool to reduce unemployment.

Chapter 30 Solutions

Principles of Economics 2e

Ch. 30 - What is the main reason for employing expansionary...Ch. 30 - In a recession, does the actual budget surplus or...Ch. 30 - What is the main advantage of automatic...Ch. 30 - Explain how automatic stabilizers work, both on...Ch. 30 - What would happen if expansionary fiscal policy...Ch. 30 - What would happen if contractionary fiscal policy...Ch. 30 - Do you think the typical time lag for fiscal...Ch. 30 - How would a balanced budget amendment affect a...Ch. 30 - How would a balanced budget amendment change the...Ch. 30 - Give some examples of changes in federal spending...Ch. 30 - Have the spending and taxes of the U.S. federal...Ch. 30 - What are the main categories of U.S. federal...Ch. 30 - What is the difference between a budget deficit, a...Ch. 30 - Have spending and taxes by state and local...Ch. 30 - What are the main categories of U.S. federal...Ch. 30 - What is the difference between a progressive tax,...Ch. 30 - What has been the general pattern of U.S. budget...Ch. 30 - What is the difference between a budget deficit...Ch. 30 - What is the difference between expansionary fiscal...Ch. 30 - Under what general macroeconomic circumstances...Ch. 30 - What is the difference between discretionary...Ch. 30 - Why do automatic stabilizers function...Ch. 30 - What is the standardized employment budget?Ch. 30 - What are some practical weaknesses of...Ch. 30 - What are some of the arguments for and against a...Ch. 30 - Why is government spending typically measured as a...Ch. 30 - Why are expenditures such as crime prevention and...Ch. 30 - Why is spending by the U.S. government on...Ch. 30 - Excise taxes on tobacco and alcohol and state...Ch. 30 - What is the benefit of having state and local...Ch. 30 - In a booming economy, is the federal government...Ch. 30 - Economist Arthur Laffer famously pointed out that,...Ch. 30 - Is it possible for a nation to run budget deficits...Ch. 30 - How will cuts in state budget spending affect...Ch. 30 - Is expansionary fiscal policy more attractive to...Ch. 30 - Is Medicaid (federal government aid to low-income...Ch. 30 - What is a potential problem with a temporary tax...Ch. 30 - If the government gives a 300 tax cut to everyone...Ch. 30 - Do you agree or disagree with this statement: It...Ch. 30 - During the Great Recession of 20082009, what...Ch. 30 - A government starts off with a total debt of $3.5...Ch. 30 - If a government runs a budget deficit of 10...Ch. 30 - Specify whether expansionary or contractionary...
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