Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 33, Problem 4RQ
To determine
Recession 2007-2009.
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Suppose the government's present value of current and projected future outlays is 75 percent of GDP and its present value of current and projected future revenues is 50 percent of GDP. What gap does this describe, and what is the size of the gap?
This information describes the _______.
A.
fiscal gap, which is 25 percent of GDP
B.
generational gap, which is 25 percent of GDP
C.
fiscal gap, which is 125 percent of GDP
D.
fiscal gap, which is
–
25
percent of GDP
Suppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $170 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out?
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
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3)Show and explain how an expansionary fiscal policy can cause crowding-out effect by using aggregateexpenditure and aggregate output curves.2)What action could the TCMB take to reduce the crowding-out effect of an expansionary fiscal policy?1)By using graphs, show and explain the effects of an expansionary fiscal policy on the goods market by taking thelink between two markets into account
Chapter 33 Solutions
Economics (Irwin Economics)
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- Explain how automatic stabilizers work, both on the taxation side and on the spending side, first in a situation where the economy is producing less than potential GDP and then in a situation where the economy Is producing more than potential GDP.arrow_forwardWhat would happen if expansionary fiscal policy was implemented in a recession but, due to lag, did not actually take effect until after the economy was back to potential GDP?arrow_forwardQ No.3 What we mean by Economic dues in case of Fiscal Policy in Islamic Economy? Discuss the function of Economic dues in the context of Zakah as a non-discretionary fiscal policy tool of Islamic Economy.arrow_forward
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