HOMEWORK # 10Fiscal PolicyIdentify each of the following as expansionary or contractionary fiscal policy (or neither)and show their effect on the ADAS model. Show the impact graphically (draw thegraphs) to illustrate.#1#2#3a. The corporate income tax rate is increasedb. Defense spending is increasedc. The Federal Reserve lowers the target for the federal funds rated. Families are allowed to deduct all their expenses for day care from their federalincome taxese. The individual income tax rate is decreasedUse the ADAS model and graph to illustrate the situation where equilibrium initiallyoccurs with real GDP equal to potential GDP and then aggregate demand (AD) shiftsleft. What actions can the Congress and President take to restore the economy?Show the impact graphically (draw the graph) to illustrate.Suppose that real GDP is currently $17.1 trillion and potential real GDP is $17.4 trillion.The government spending multiplier is 2 and the tax multiplier is - 1.6.a. Holding all else constant, how much government spending will be needed torestore the economy to potential GDP?b. Holding all else constant, how much will taxes need to be cut to restore theeconomy to potential GDP?

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#1 Identify each of the following as expensionary or contractionary and show their effect on the ADAS model. Show the impact graphically (draw the graphs) to illustrate. a. The corporate income tax rate is increased b. Defense spending is increased c. The Federal Reserve lowers the target for the federal funds rate d. Families are allowed to deduct all their expenses for day care from their federal income taxes e. The individual income tax rate is decreased where equilibrium initially

#1 Identify each of the following as expensionary or contractionary and show their effect on the ADAS model. Show the impact graphically (draw the graphs) to illustrate. a. The corporate income tax rate is increased b. Defense spending is increased c. The Federal Reserve lowers the target for the federal funds rate d. Families are allowed to deduct all their expenses for day care from their federal income taxes e. The individual income tax rate is decreased where equilibrium initially

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Question

HOMEWORK # 10
Fiscal Policy
Identify each of the following as expansionary or contractionary fiscal policy (or neither)
and show their effect on the ADAS model. Show the impact graphically (draw the
graphs) to illustrate.
#1
#2
#3
a. The corporate income tax rate is increased
b. Defense spending is increased
c. The Federal Reserve lowers the target for the federal funds rate
d. Families are allowed to deduct all their expenses for day care from their federal
income taxes
e. The individual income tax rate is decreased
Use the ADAS model and graph to illustrate the situation where equilibrium initially
occurs with real GDP equal to potential GDP and then aggregate demand (AD) shifts
left. What actions can the Congress and President take to restore the economy?
Show the impact graphically (draw the graph) to illustrate.
Suppose that real GDP is currently $17.1 trillion and potential real GDP is $17.4 trillion.
The government spending multiplier is 2 and the tax multiplier is - 1.6.
a. Holding all else constant, how much government spending will be needed to
restore the economy to potential GDP?
b. Holding all else constant, how much will taxes need to be cut to restore the
economy to potential GDP?

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