Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 32, Problem 3TY
To determine
The arguments that strengthen the use of discretionary policy and the arguments for rules.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The economy is at full employment, but the government is disappointed with the growth rate of real GDP. It wants to increase real GDP growth by stimulating investment. At the same time, it wants to avoid an increase in the price level. a.Suggest a combination of fiscal and monetary policies that will achieve the government’s objective. b.Which policy would you recommend that the government adopt? c. Explain the mechanisms at work under your recommended policy. d.What is the effect of your recommended policy on the composition of aggregate demand? eWhat are the short-run and long-run effects of your recommended policy on real GDP and the price level?
What is the best combination of fiscal policies and monetary policies for a country like Japan whose price levels are increasing while unemployment is being controlled?
a.None of the choices is correct
b.Decrease taxes, decrease government spending and decrease money supply
c.Decrease taxes, increase government spending and increase money supply
d.Increase taxes, decrease government spending and decrease money supply
Use of discretionary policy to stabilize the economy
Chapter 32 Solutions
Economics: Principles and Policy (MindTap Course List)
Knowledge Booster
Similar questions
- What is the best combination of fiscal policies and monetary policies for a country like Japan whose price levels are increasing while unemployment is being controlled? a. Decrease taxes, increase government spending and increase money supply b. Decrease taxes, decrease government spending and decrease money supply c. None of these choice is correct d. Increase taxes, decrease government spending and decrease money supplyarrow_forwarda. 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_forwardIn modern developed economies, central banks (like the U.S. Federal Reserve System) perform at least two major tasks; they: Select one: a. conduct fiscal policy and serve as financial intermediaries. b. control the money supply and collect tax revenues. c. conduct fiscal policy and serve as lenders of last resort. d. control the money supply and regulate banks.arrow_forward
- Can governments use expansionary fiscal policy or expansionary monetary to effectively fight recessions? Why or Why Not?arrow_forwardThe economy goes into recession. Which of the following lists contains things policymakers could do to try to end the recession? a. Increase the money supply, increase taxes, decrease government spending b. Decrease the money supply, increase taxes, decrease government spending c. Increase the money supply, increase taxes, increase government spending d. Increase the money supply, decrease taxes, increase government spendingarrow_forwardA. Differentiate between discretionary fiscal policy and nondiscretionary or built-in stabilization policy. B. When in a recession a government has the option to increase government spending or decrease taxes to stimulate the economy. Discuss which piece of GDP is being targeted when each is used.arrow_forward
- What is the difference between fiscal and monetary policy? What fiscal and monetary steps can the government and the central bank undertake during times of recession to help the economy? What are the pros and cons of fiscal and monetary policy?arrow_forwardBQ.1.2Distinguish between monetary and fiscal policy.arrow_forwardEconomists at which of the following government offices help formulate spending plans and regulatory policies? Office of Management and Budget Congressional Budget Office Department of the Treasury The Federal Reservearrow_forward
- 1. Use of discretionary policy to stabilize the economy Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen 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 2020. According to the graph, this economy is in .To bring the economy back to the natural level monetary or fiscal policy such as of output, the Federal Open Market Committee (FOMC) could use Shift the appropriate curve on the following graph to illustrate the effects of the policy you chose above. PRICE LEVEL 150 130 110 90 LRAS AS AD ASarrow_forward1. Use of discretionary policy to stabilize the economy Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen 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 February 2023. According to the graph, this economy is in . To bring the economy back to the natural lavel of output, the govemment could use monatary or fiscal palicy such as Shift the appropriate curve on the foliowing graph to iustrate the effects of the policy you chose. 150 LRAS AS AD 130 110 AS 90 AD 70 60 20 22 24 28 28 30 OUTPUT (Trilions of dollars) Suppose that in February 2023, policymakers undertake the type of policy that is necessary to bring the economy beck to the natural…arrow_forwardFiscal policy refers to a) the spending and taxing policies used by the government to influence the economy. b) the behaviour of the nation's central bank, regarding the nation's money supply. c) the techniques used by a firm to reduce its tax liability. d) the government's ability to regulate a firm's behaviour in the financial markets.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning