EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9780100605930
Author: Blinder
Publisher: YUZU
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Chapter 33, Problem 3TY
To determine
Explain the effect of deficit.
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Describe fiscal policy. How can it affect the money supply, interest rates, and the expansion and contraction of the economy? What are the problems and pitfalls associated with fiscal policy? In what ways does it directly affect us?
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Read the following quote and explain in complete sentences whether it discusses fiscal policy, monetary policy or both.
“Taking substantial action at this point, though, would send what could be a negative message to the market — that the balance sheet runoff, which former Chair Janet Yellen said would be ‘like watching paint dry,’ is running into snags and requires corrective action. However, the Fed would have no choice if there are indications that it can't control the market movements, particularly considering the record level of Treasury debt the government has issued this year.”
Chapter 33 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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- In mid-2001, the Bush administration won congressional approval for lower income tax rates. One stipulation of this rate cut was that the rates also be applied retroactively to taxes from the year 2000. Question: Would you consider this fiscal policy to be demand-side focused, supply-side focused, or both? Explain your response.arrow_forwardIf the government were to increase income taxes, how would that affect output (RGDP) and the price level in the short run? In the long run? Describe how the aggregate supply and aggregate demand curves would be affected? How should uncertainty about the size of fiscal multipliers affect the reliance on monetary and fiscal policy as tools for stabilizing the economy?arrow_forwardYou are the Secretary of the Treasury, working with the president to implement appropriate policies. Currently, actual GDP is below potential output and falling. To stabilize the economy, you'd recommend fiscal policy, which could include a. expansionary; increased government purchases and tax cuts b. expansionary; decreased government purchases and a tax increase c. contractionary; increased government purchases and tax cuts d. contractionary; decreased government purchases and a tax increasearrow_forward
- 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?arrow_forwardA country is experiencing a recession due to an unexpected shock to aggregate demand. The economy's current level of real GDP is below its long-run equilibrium and the price level is below the equilibrium price level. Government officials must decide whether to implement fiscal policy or allow the economy to return to full employment on its own. a. Suppose that government officials have decided to implement expansionary fiscal policies. What are their desired outcomes? Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click again to empty the box for the incorrect answers. ? increase aggregate supply increase aggregate demand ? expand real GDP ? raise the price level reduce unemployment ? control inflation b. Which of the following policy is consistent with expansionary fiscal policy? O Increase sales tax rates. O Reduce personal income tax rates. O Reduce spending on government infrastructure. O Increase the amount of currency…arrow_forwardList the 3 major economic goals of fiscal policy. Who is responsible for fiscal policy? What issue or problem in the economy would be fixed with expansionary fiscal policy? Contractionary fiscal policy? Using an aggregate supply and demand graph, show what happens when expansionary fiscal policies are enacted such as the 2017 Tax Cuts and Jobs Act when the economy is at full employment. Label all of the curves, the vertical and horizontal axis and show the direction and impact on the economy.arrow_forward
- What is the role of the Council Economic Advisers (CEA) as it relates to the effectiveness of the recent U.S. fiscal policy? Find the names and university affiliations of the present members of the CEA. (This may be a helpful website for finding sum of the information relating to the question. https://www.whitehouse.gov/cea/staff)arrow_forwardWas fiscal policy effective when the US economy was experiencing stagflation during the 1970s? Why or why not?arrow_forwardWhat are the three fiscal policy tools and how would each be used to counter a contractionary gap?arrow_forward
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