EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 8220100605932
Author: Blinder
Publisher: Cengage Learning US
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Question
Chapter 34, Problem 8DQ
a)
To determine
Arguments for engaging in expansionary monetary or fiscal policies under the given circumstances.
b)
To determine
Arguments for engaging in contractionary monetary or fiscal policies under the given circumstances.
c)
To determine
More persuasive argument among the two.
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Chapter 34 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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Similar questions
- 44)Which of the following statements is most accurate regarding fiscal policy and monetary policy? Select one: a. Monetary policy can be changed more quickly than fiscal policy. Fiscal policy can be changed at any of the FOMC meetings and the smaller number of individuals involved makes it easier to change fiscal policy. b. Fiscal policy can be changed more quickly than monetary policy. Fiscal policy has much shorter delays due to the smaller number of legislators involved. c. Monetary policy can be changed more quickly than fiscal policy. Monetary policy can be changed at any of the FOMC meetings and the smaller number of individuals involved makes it easier to change monetary policy. d. Fiscal policy can be changed more quickly than monetary policy. Monetary policy has much longer delays due to the larger number of legislators involved.arrow_forwardplease answer the following question: 1. Suppose an economy is slowing and more and more people are losing their jobs and, therefore, paying less income taxes. If policy makers try to avoid a budget deficit by raising taxe rates, this would probablyA) help pull the economy out of a depression.B) make the economic slowdown worse.C) increase inflation.arrow_forwardWhich organisation controls fiscal policy in Australia? Select one: a. The Reserve Bank of Australia O b. The National Cabinet O. The State Governments O d. The Federal Reserve e. The Federal Governmentarrow_forward
- a. 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_forwardAn economy is currently in a recession. Assume the government budget is balanced. In the absence of any discretionary policy action, will the government budget move into surplus, deficit, or remain in balance? Explain. (e) On your graph in part (a), show how the economy will adjust in the long run in the absence of any discretionary policy action. (f) Now assume instead the government increases spending without changing taxes to close the recessionary gap. What effect will this policy have on the national debt? (g) Draw a correctly labeled graph of the loanable funds market and show the effect of the change in the national debt on the equilibrium real interest rate. (h) Based on the change in the equilibrium real interest rate identified in part (g), what will happen to economic growth in the country in the long run? Earrow_forward55)If the real GDP and Price level both decreased, the following must have occurred: Select one: a. Expansionary fiscal policy b. Contractionary fiscal policy c. Increase in capital d. Increase in labor supply e. None of the abovearrow_forward
- Unlike households, governments are often able to sustain large debts. For example, in 2019, the U.S. government’s total debt reached $21.2 trillion, approximately equal to 105.3% of GDP. At the time, according to the U.S. Treasury, the average interest rate paid by the government on its debt was 1.3%. However, running budget deficits becomes hard when very large debts are outstanding. a. Calculate the dollar cost of the annual interest on the government’s total debt, assuming the interest rate and debt figures previously cited. Enter your answer in billions of dollars, and round to the nearest tenth. - Annual interest: $ (Billion) b. If the government operates on a balanced budget before interest payments are taken into account, at what rate must GDP grow for the debt–GDP ratio to remain unchanged? Enter your answer as a percentage and round to the nearest tenth of a percent. - Rate of GDP growth: (%) c. Calculate the total increase in national debt if the…arrow_forwardAssume that Country D is in a recession. 1. What fiscal policy actions would combat the recession? 2. What monetary policy actions would combat the recession? 3. Could the fiscal policy or monetary policy in this case cause crowding out?arrow_forward
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