Gross Domestic Product (GDP): It is defined as the value of output which is produced inside the border of a country in the given interval of time. Fiscal policy: It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa. Monetary policy : It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa. Liquidity trap: It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Question

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Answer 1

Question

Chapter 32, Problem 1P

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

a. Policy used by policy makers in Japan to promote growth.

From the data it is concluded that policy maker used expansionary monetary as well as fiscal policy.

Short term interest rate has decreased from 7.38% in 1991 to 0.04% in 2003. This indicates that the policy used is expansionary monetary policy.

Government debt as percentage of the GDP rose from 64.8% in 1991 to 157.5% in 2003. And the government deficit has also increased from to 7.67%. This indicates the use of expansionary fiscal policy by the policy makers.

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

b. Situation of liquidity traps.

It is a situation of liquidity trap in an economy. When the interest rate is very low, almost equal to zero, the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Monetary policy is ineffective because the interest rate is very low. However, in such a case fiscal policy is fully effective as there is no crowding out due to increase in interest rate. The change in expenditure or tax is reflected as the change in the real GDP.

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Answer 2

Question

Chapter 32, Problem 1P

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

a. Policy used by policy makers in Japan to promote growth.

From the data it is concluded that policy maker used expansionary monetary as well as fiscal policy.

Short term interest rate has decreased from 7.38% in 1991 to 0.04% in 2003. This indicates that the policy used is expansionary monetary policy.

Government debt as percentage of the GDP rose from 64.8% in 1991 to 157.5% in 2003. And the government deficit has also increased from to 7.67%. This indicates the use of expansionary fiscal policy by the policy makers.

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

b. Situation of liquidity traps.

It is a situation of liquidity trap in an economy. When the interest rate is very low, almost equal to zero, the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Monetary policy is ineffective because the interest rate is very low. However, in such a case fiscal policy is fully effective as there is no crowding out due to increase in interest rate. The change in expenditure or tax is reflected as the change in the real GDP.

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Answer 3

Question

Chapter 32, Problem 1P

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

a. Policy used by policy makers in Japan to promote growth.

From the data it is concluded that policy maker used expansionary monetary as well as fiscal policy.

Short term interest rate has decreased from 7.38% in 1991 to 0.04% in 2003. This indicates that the policy used is expansionary monetary policy.

Government debt as percentage of the GDP rose from 64.8% in 1991 to 157.5% in 2003. And the government deficit has also increased from to 7.67%. This indicates the use of expansionary fiscal policy by the policy makers.

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

b. Situation of liquidity traps.

It is a situation of liquidity trap in an economy. When the interest rate is very low, almost equal to zero, the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Monetary policy is ineffective because the interest rate is very low. However, in such a case fiscal policy is fully effective as there is no crowding out due to increase in interest rate. The change in expenditure or tax is reflected as the change in the real GDP.

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Answer 4

Question

Chapter 32, Problem 1P

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

a. Policy used by policy makers in Japan to promote growth.

From the data it is concluded that policy maker used expansionary monetary as well as fiscal policy.

Short term interest rate has decreased from 7.38% in 1991 to 0.04% in 2003. This indicates that the policy used is expansionary monetary policy.

Government debt as percentage of the GDP rose from 64.8% in 1991 to 157.5% in 2003. And the government deficit has also increased from to 7.67%. This indicates the use of expansionary fiscal policy by the policy makers.

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

b. Situation of liquidity traps.

It is a situation of liquidity trap in an economy. When the interest rate is very low, almost equal to zero, the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Monetary policy is ineffective because the interest rate is very low. However, in such a case fiscal policy is fully effective as there is no crowding out due to increase in interest rate. The change in expenditure or tax is reflected as the change in the real GDP.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 32, Problem 1P

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

a. Policy used by policy makers in Japan to promote growth.

From the data it is concluded that policy maker used expansionary monetary as well as fiscal policy.

Short term interest rate has decreased from 7.38% in 1991 to 0.04% in 2003. This indicates that the policy used is expansionary monetary policy.

Government debt as percentage of the GDP rose from 64.8% in 1991 to 157.5% in 2003. And the government deficit has also increased from to 7.67%. This indicates the use of expansionary fiscal policy by the policy makers.

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

b. Situation of liquidity traps.

It is a situation of liquidity trap in an economy. When the interest rate is very low, almost equal to zero, the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Monetary policy is ineffective because the interest rate is very low. However, in such a case fiscal policy is fully effective as there is no crowding out due to increase in interest rate. The change in expenditure or tax is reflected as the change in the real GDP.

Answer 6

Chapter 32, Problem 1P

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

a. Policy used by policy makers in Japan to promote growth.

From the data it is concluded that policy maker used expansionary monetary as well as fiscal policy.

Short term interest rate has decreased from 7.38% in 1991 to 0.04% in 2003. This indicates that the policy used is expansionary monetary policy.

Government debt as percentage of the GDP rose from 64.8% in 1991 to 157.5% in 2003. And the government deficit has also increased from to 7.67%. This indicates the use of expansionary fiscal policy by the policy makers.

Answer 7

Chapter 32, Problem 1P

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Answer 8

Expert Solution

Explanation of Solution

a. Policy used by policy makers in Japan to promote growth.

From the data it is concluded that policy maker used expansionary monetary as well as fiscal policy.

Short term interest rate has decreased from 7.38% in 1991 to 0.04% in 2003. This indicates that the policy used is expansionary monetary policy.

Government debt as percentage of the GDP rose from 64.8% in 1991 to 157.5% in 2003. And the government deficit has also increased from to 7.67%. This indicates the use of expansionary fiscal policy by the policy makers.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Expert Solution

Explanation of Solution

b. Situation of liquidity traps.

It is a situation of liquidity trap in an economy. When the interest rate is very low, almost equal to zero, the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Monetary policy is ineffective because the interest rate is very low. However, in such a case fiscal policy is fully effective as there is no crowding out due to increase in interest rate. The change in expenditure or tax is reflected as the change in the real GDP.

Answer 13

To determine

Concept Introduction:

Gross Domestic Product (GDP):

It is defined as the value of output which is produced inside the border of a country in the given interval of time.

Fiscal policy:

It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then the AD curve shifts rightward and vice versa.

Monetary policy:

It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.

Liquidity trap:

It is a situation in an economy when the interest rate is very low, almost equal to zero so; the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Answer 14

Expert Solution

Explanation of Solution

b. Situation of liquidity traps.

It is a situation of liquidity trap in an economy. When the interest rate is very low, almost equal to zero, the monetary policy loses its effectiveness. People prefer to keep money in the form of cash rather than bond or deposits.

Monetary policy is ineffective because the interest rate is very low. However, in such a case fiscal policy is fully effective as there is no crowding out due to increase in interest rate. The change in expenditure or tax is reflected as the change in the real GDP.