Lectuy! incerOutwOutv Q Econ Crow Q Econ Intro (245)Sign cc 2017A Outvols.org/access/content/group/49f983b1-b488-4f6d-abf0-d1 fb140a9df6/Homework%20Sets/HW7.pdfEcon 105HW 7Study QuestionsNote: in this homework, "New Classical Theory" means the economic theory that opposes Keynes.1) Explain, step by step, the "Crowding Out" mechanism when the government tries to fight a recessionwith expansionary Fiscal Policy. Use appropriate graphs. What are the important implications of thiseffect as argued by New Classical theory?

Crowding out occurs when expansionary fiscal policy causes the interest rates to rise, thereby…

1) Explain, step by step, the "Crowding Out" mechanism when the government tries to fight a recession with expansionary Fiscal Policy. Use appropriate graphs. What are the important implications of this effect as argued by New Classical theory?

1) Explain, step by step, the "Crowding Out" mechanism when the government tries to fight a recession with expansionary Fiscal Policy. Use appropriate graphs. What are the important implications of this effect as argued by New Classical theory?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Concept explainers

Fiscal Policy and Money Market

Fiscal policy is one of the important tools that is used by the government to control inflation or aggregate demand in the economy. Under this policy, there are two rules which are used by the government, one is the expenditure of the government and the other is the taxation or income of the government which it collects from the public.

Question

Lectu
y! incer
Outw
Outv Q Econ Crow Q Econ Intro (245)
Sign cc 2017
A Outv
ols.org/access/content/group/49f983b1-b488-4f6d-abf0-d1 fb140a9df6/Homework%20Sets/HW7.pdf
Econ 105
HW 7
Study Questions
Note: in this homework, "New Classical Theory" means the economic theory that opposes Keynes.
1) Explain, step by step, the "Crowding Out" mechanism when the government tries to fight a recession
with expansionary Fiscal Policy. Use appropriate graphs. What are the important implications of this
effect as argued by New Classical theory?

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Fiscal Policy: Recessionary vs Expansionary Policy Complete the following exercises. 1. Describe a policy measure the government can use to close a recessionary gap. 2. Illustrate your response to question 1 in a graph. 3. Describe a policy measure the government can use to close an inflationary gap. 4. Please Illustrate Graphically in response to question (question 3: Describe a policy measure the government can use to close an inflationary gap.)
34. Discretionary fiscal policy refers to A) deliberate government efforts to stabilize the economy through government spending and taxes. B) the use of automatic stabilizers and intervention policies to stabilize the economy. C) any government policy that requires a lag period of at least three months. D) the deliberate use of government spending and taxes to complement the effects of monetary policy in an effort to stabilize the economy. 35. An inflationary gap can be closed with A) using an expansionary monetary policy. B) using a policy action such as a reduction in taxes. C) using a policy action such as a reduction in government purchases. D) imposing price controls to prevent prices from rising. 36. The term “crowding out” refers to the phenomenon that occurs when increased government spending A) raises the price level and reduces consumption. B)…
hi, posting this again. will you let me know if these are correct? 18- tax cuts directed at higher income individuals will do more to stimulate the economy than those directed to lower income individuals, in the keynesian model.-true 19- growing federal budget deficits are a problem cased by kenynesian economics- false 20- Keynes advocated using government deficits in times of depression -true
a) What are the three fiscal policy tools and how would each be used to counter a contractionary gap? b) True or False and explain: Fiscal Policy is effective at reducing the duration of an economic contraction. c) True or False and explain: Households always react to tax changes in a predictable manner.
How would I do a and b?
Question 2In the basic Keynesian model, fiscal policy should not cause an increase in the public debt. However, in this course you have learnt that most national governments have accumulated public debt by mis-using the Keynesian model. The worst example cited is that of Greece. Explain why governments find it difficult if not impossible to use fiscal policy without accumulating debt. Explain how discretionary fiscal policy is different from automatic stabilizers. Which one is the more likely to cause the debt accumulation problem in part A? Explain why a foreign debt is worse than a domestic debt.