14) The relationship between monetary policy and the time it takes for policy to change spendingis an example ofthe benefits of "leaning against the wind"why fiscal policy is preferable because it does not suffer from lags.the condition that monetary policy affects the economy almost immediatelythe problem that monetary policy affects aggregate demand primarily by changinginterest rates but it takes time for changes in interest rates to alter spending.

The monetary policy is the policy of the monetary authority of the economy regarding the money…

Answered: 14) The relationship between monetary…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, as well as the pros and cons of using these tools to combat economic fluctuations. The following graph plots hypothetical aggregate demand (AD), short-run aggregate supply (AS), and long-run aggregate supply (LRAS) curves for the U.S. economy in January 2026. Suppose the government chooses to intervene in order to return the economy to the natural level of output by using ▾ policy. Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output.
Read the following quote and explain in complete sentences whether it discusses fiscal policy, monetary policy or both. “Taking substantial action at this point, though, would send what could be a negative message to the market — that the balance sheet runoff, which former Chair Janet Yellen said would be ‘like watching paint dry,’ is running into snags and requires corrective action. However, the Fed would have no choice if there are indications that it can't control the market movements, particularly considering the record level of Treasury debt the government has issued this year.”
Anticipating a recession forthcoming, the central bank would conduct a(n) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. contractionary fiscal policy a b expanssionary fiscal policy expanssionary monetary policy contractionary monetary policy
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)…
1. Which of the following is a major area of disagreement between activists and nonactivists? Group of answer choices -Activists believe discretionary macroeconomic policy can be applied in a manner that will enhance economic stability. Nonactivists disagree. -Activists believe monetary policy is more potent than fiscal policy. Nonactivists disagree. -Activists believe changes in monetary and fiscal policy exert their effects instantaneously. Nonactivists think they work only with a substantial lag. -Nonactivists think macroeconomic policy is sometimes motivated by the pursuit of political gain. Activists disagree. Which of the following is correct?
Assume that Country D is in a recession. 1. What fiscal policy actions would combat the recession? 2. What monetary policy actions would combat the recession? 3. Could the fiscal policy or monetary policy in this case cause crowding out?
In Country B, the current unemployment rate is lower than the natural rate of unemployment. A. Draw a correctly labeled graph of the long run and short run Phillips Curve. Label the current short run equilibrium point A. B. Identify a fiscal policy action that will return the economy to full employment. C. Draw a correctly labeled graph of the loanable funds market. Show the effect of the fiscal policy action you selected in Part B on the real interest rate in the short run.
7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, as well as the pros and cons of using these tools to combat economic fluctuations. The following graph plots hypothetical aggregate demand (AD), short-run aggregate supply (AS), and long-run aggregate supply (LRAS) curves for the U.S. economy in February 2026. Suppose the government chooses to intervene in order to return the economy to the natural level of output by using Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output. AS 110 X AD 70 LRAS 24 26 OUTPUT (Trillions of dollars) PRICE LEVEL 150 130 50 20 22 28 30 AD policy. AS Suppose that in February 2026 the government successfully carries out the type of…
Inflation rates in the US have recently been at their highest level in decades. Imagine your local Congressman came to you for advice. If lower inflation is her only goal, what type of policy would you recommend? A contractionary fiscal policy An expansionary fiscal policy
Based on the data in both Sets I and II Set I: Real GDP growth 0.7% Planned Gov. Expenditures $1600 b. Planned Gov. Revenues $1200 b. Gov. Debt at $ 4 trillion Set Il: M1 growth rate: 6% Discount rate changed to 3% O We don't have enough information to tell if either Fiscal policy or Monetary policy are being used O A Supply side approach is probably is being followed O We can tell that both Fiscal and Monetary Policy are being used to stabilize the economy O A laissez faire approach is probably being followed
This week's City Council Scenario: The Federal Government is developing a plan to help the nation's economy. There are some calling for Expansionary Fiscal Policies while others are in favor of Expansionary Monetary Policies. Prepare a response to help the townspeople understand the plans being presented at the Federal Level. Contrast Expansionary Fiscal policies and Expansionary Monetary policies. Explain the effect of Fiscal and Monetary policies on the economy. Discuss the drawbacks of not using any policies to help the economy.

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