Microeconomics: Private and Public Choice (MindTap Course List)
15th Edition
ISBN: 9781285453569
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter ST4, Problem 4CQ
To determine
Explain the Keynesian arguments to support the government policies.
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As you have learned in Unit 8 (this week), monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard:
Start with a brief introduction that explains use of Government policy to control the economy.
When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.
When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.
What specific fiscal policy tools would you use to stimulate aggregate demand and how?
What specific monetary policy tools would you use to stimulate aggregate demand and how?
What is your conclusion, should policymakers use the monetary and or fiscal policy, or a combination of both, to stimulate aggregate demand? Explain your reasoning.
In 2010 the Greek government had to inform the European Commission on how it would control its budget deficit and improve the performance of its economy. The government’s debt is so high that agencies assessing the creditworthiness of the government downgraded it (which would mean more interest has to be paid to raise finance). Proposals were likely to include a 10% cut in government spending.
What actions can the government take to increase national income growth in Greece?
If the Greek economy is in recession what would you expect to be the effect on:
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b) Unemployment?
c) Imports?
Explain your answers.
Chapter ST4 Solutions
Microeconomics: Private and Public Choice (MindTap Course List)
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