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- please explain this question in words. Assume that fiscal policy can be accomplished by changing only one of G and T. In the IS-LM framework, suppose the effect on the general equilibrium output is the same between expansionary fiscal policy and expansionary monetary policy. Which one would you expect to have a greater impact on the equilibrium consumption?Expectation in Fiscal policy & Ricardian equivalence. One can argue that macroeconomics is essentially a story of a 'journey' from disequilibrium back to equilibrium. The recession caused by Covid that had forced many countries to use fiscal policy to compensate the shock and stimulate the economy is one example of disequilibrium. Cited from the Ministry of Finance website, the use of the government budget to mitigate the impact of the Covid crisis was clearly stated: "The state budget will continue to work hard to protect the community through Covid 19 handling from a health perspective, especially during the implementation of the Emergency Community Activity Restrictions (PPKM). This refocusing and sharpening of priorities is expected to help all communities in various sectors, especially the health sector, in dealing with Emergency PPKM." (MOF-RI News Index, 7/5/2021). Questions: a. Based on the macro workhorse model, explain the 'journey' (mechanism) how an initial disequilibrium…A. Assume that a hypothetical economy with an MPC of .75 is experiencing severe recession. By how much would government spending have to rise to shift the aggregate demand curve rightward by $70 billion? B. How large a tax cut would be needed to achieve the same increase in aggregate demand?
- Consider the IS/LM model. Show the effects of the following policies on Y and r on a graph: a) Contractionary fiscal policy b) Expansionary fiscal policyThe graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by changing taxes to reduce the burden of this recession. Fiscal Policy Price Level 140 130 120 110 100 90 80 70 60 50 LRAS $ AS AD₁ 40 0 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) billion AD Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ b. If the MPC is 0.6, how much do taxes need to change to shift aggregate demand by the amount you found in part a? billion Suppose instead that the MPC is 0.92 c How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by S billion and taxes need to change by $[ billion.Assume that fiscal policy can be accomplished by changing only one of G and T. In the IS-LM framework, suppose the effect on the general equilibrium output is the same between expansionary fiscal policy and expansionary monetary policy. Which one would you expect to have a greater impact on the equilibrium consumption?
- 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 -trueConsider an economy suffering from recession (with its real GDP below the potential level). Using a basic (static) aggregate demand — aggregate supply (AD-AS) diagram explain how the fiscal policy may help boost the economy during a recession. Is the expansionary fiscal policy necessarily inflationary? Explain your answer using the AD-AS model. Use a suitable diagram to explain how an expansionary fiscal policy may affect the value of the Australian dollar against the Chinese yuan (assume no change in policies in China).Economics 1) Distinguish between discretionary and nondiscretionary fiscal policy. 2) Differentiate between expansionary and contractionary fiscal policy. 3) Plot the following markets on a graph: AD/AS graph: using 19.1 trillion for RGDP and 1.9% for inflation as point A (equilibrium). How will our AD/AS graph look like when U.S. government buys more military vessels (Shift the appropriate AD/AS curve on the graph)? 4) Plot the following markets on a graph: AD/AS graph: using 19.1 trillion for RGDP and 1.9% for inflation as point A (equilibrium). How will our AD/AS graph look like when Congress implements an income tax cut (Shift the appropriate AD/AS curve on the graph)?
- Assume that a hypothetical economy with an MPC of 0.9 is experiencing severe recession. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion? How large a tax cut would be needed to achieve the same increase in aggregate demand? b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt. increase spend by increase tax byIn each of the following cases, either a recessionary or inflationary gap exists. Assume that the aggregate supply curve is horizontal, so that the change in real GDP arising from a shift of the aggregate demand curve equals the size of the shift of the curve. Calculate both the change in government purchases of goods and services and the change in government transfers necessary to close the gap. a. Real GDP equals $100 billion, potential output equals $160 billion, and the marginal propensity to consume is 0.75. b. Real GDP equals $250 billion, potential output equals $200 billion, and the marginal propensity to consume is 0.5. c. Real GDP equals $180 billion, potential output equals $100 billion, and the marginal propensity to consume is 0.8. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Consider a simple Keynesian income-spending model of an economy described by the following equations 1. C= 250 + 0.75Yd TR = 200 T = 0.1Y 1=250 %3D G= 600 X = 350 %3D M=0.15Y (a) Calculate the equilibrium income level. (b) Sketch this equilibrium position using a two-dimensional graph. If potential GDP is 3,570 what is the size of the output gap? If public sector spending on goods and services is increased by 50, what is the new equilibrium level of income? How much should public spending have been increased by in order to have closed the output gap? (c) [All calculations to one decimal point. You must report your calculations.] MacBook Air 888 000 F1 F2 F3 F4 FS F7 F10 £ # @ € 2 $ % & 3 4 5 6 7 8 %3D Q E R Y A S F V alt cmd cmd V