1. Use of discretionary policy to stabilize the economyShould policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of howmonetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen economic fluctuations.The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (As), and long-run aggregate supply curve(LRAS) for the economy in February 2023. According to the graph, this economy is in. To bring the economy back to the naturallavel of output, the govemment could usemonatary or fiscal palicy such asShift the appropriate curve on the foliowing graph to iustrate the effects of the policy you chose.150LRASASAD130110AS90AD7060202224282830OUTPUT (Trilions of dollars)Suppose that in February 2023, policymakers undertake the type of policy that is necessary to bring the economy beck to the natural level of output,given the scenario just described. In April 2023, imports decrease, because the United States has implemented trade restrictions on Japanese goods.Because of theassociated with implementing monetary and fiscal policy, the impect of the policymakers' stabilization policywill Ikelyonce the effects of the policy are fully realized.PRICE LEVEL

Demand curve graph showing how the demanded commodity for an item or administration differs with…

1. Use of discretionary policy to stabilize the economy Chould pollcymakers use monetary polley, flscal policy, or both in an effort to stabilize the economy? The following questions eddress the lssue nonetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen econamie fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate suppl LRAS) for the economy in February 2023. According to the graph, this economy in in, . To bring the economy back to the n avel of output, the govermment cauld use monatary or fiscal palicy such as Shift the oppropriete curve on the following graph to Mustrate the effects of the poicy you chose. 150 LRAS

1. Use of discretionary policy to stabilize the economy Chould pollcymakers use monetary polley, flscal policy, or both in an effort to stabilize the economy? The following questions eddress the lssue nonetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen econamie fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate suppl LRAS) for the economy in February 2023. According to the graph, this economy in in, . To bring the economy back to the n avel of output, the govermment cauld use monatary or fiscal palicy such as Shift the oppropriete curve on the following graph to Mustrate the effects of the poicy you chose. 150 LRAS

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Use of discretionary policy to stabilize the economy
Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of how
monetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen economic fluctuations.
The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (As), and long-run aggregate supply curve
(LRAS) for the economy in February 2023. According to the graph, this economy is in
. To bring the economy back to the natural
lavel of output, the govemment could use
monatary or fiscal palicy such as
Shift the appropriate curve on the foliowing graph to iustrate the effects of the policy you chose.
150
LRAS
AS
AD
130
110
AS
90
AD
70
60
20
22
24
28
28
30
OUTPUT (Trilions of dollars)
Suppose that in February 2023, policymakers undertake the type of policy that is necessary to bring the economy beck to the natural level of output,
given the scenario just described. In April 2023, imports decrease, because the United States has implemented trade restrictions on Japanese goods.
Because of the
associated with implementing monetary and fiscal policy, the impect of the policymakers' stabilization policy
will Ikely
once the effects of the policy are fully realized.
PRICE LEVEL

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