- Practice.pdfOsterling/Downloads/Macro%20Practice.pdf#18. Because monetary and fiscal lags are long and variable:a. stronger policies must be used.b. successful stabilization policy is completely impossible.c. attempts to stabilize the economy are often destabilizing.d. policy must be completely passive.#19. If government debt is not changing, then:a. the economy is at long-run equilibrium.b. the government's budget must be balanced.GDP must equal the natural rate of output.d. capital per worker is constant.C.#20. One policy response to the 2008 financial crisis in the U.S. was to increasThis policy response can be represented in the IS-LM model by shifting thea. LM; right|b. LM; leftc. IS, rightd. IS: left

#18. Because monetary and fiscal lags are long and variable: a. stronger policies must be used. b. successful stabilization policy is completely impossible. c. attempts to stabilize the economy are often destabilizing. d. policy must be completely passive. #19. If government debt is not changing, then: the economy is at long-run equilibrium. b. the government's budget must be balanced. c. GDP must equal the natural rate of output. d. capital per worker is constant. a. #20. One policy response to the 2008 financial crisis in the U.S. was to incre This poliey response can be represented in the IS-LM model by shifting the a. LM; right| b. LM; left c. IS; right d. IS; left

#18. Because monetary and fiscal lags are long and variable: a. stronger policies must be used. b. successful stabilization policy is completely impossible. c. attempts to stabilize the economy are often destabilizing. d. policy must be completely passive. #19. If government debt is not changing, then: the economy is at long-run equilibrium. b. the government's budget must be balanced. c. GDP must equal the natural rate of output. d. capital per worker is constant. a. #20. One policy response to the 2008 financial crisis in the U.S. was to incre This poliey response can be represented in the IS-LM model by shifting the a. LM; right| b. LM; left c. IS; right d. IS; left

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Graph the long-run impact of a permanent reduction in the fiscal deficit and show how this policy changes the long run value immediately and over time. Label the axes on the graph and indicate the direction of changes. 1. Real wage rate 2. Real interest rate 3. Rental Price of capital 4. GDP per worker I
Fiscal policy refers to a) the spending and taxing policies used by the government to influence the economy. b) the behaviour of the nation's central bank, regarding the nation's money supply. c) the techniques used by a firm to reduce its tax liability. d) the government's ability to regulate a firm's behaviour in the financial markets.
One criticism of the fiscal policy ineffectiveness is because: A.the velocity of money is predictable. B.it is dependent on Congress' approval. C.the crowding-out effect increases investment. D.prices and wages are sticky in the short run.
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Using a correctly labeled loanable funds graph, show the effect of the contractionary fiscal policy decreasing government spending on real interest rates. Given the change in the real interest rate. What is the impact on each of the following? a. investment b. Economic growth rate. Explain. c. The international value of the dollar. Explain. Now assume instead that the government takes no policy action to fix the problem of the economy that is operating above full employment. In the long run, will the short-run aggregate supply increase, decrease, or remain unchanged? Explain.
. In the long-run framework, budget surpluses: Select correct and explain why its correct should be run whenever output dips below potential output. should never be run since they crowd out investment in the short run. are better than budget deficits over the long run because unlike budget deficits, they increase saving and investment. should be run on a permanent basis since they boost saving and investment and stimulate economic growth.
Automatic stabilizers cause government revenues to during a recession and cause government expenditures to during a recession. (Choose the answer that fills in the two blanks) a. Increase; decrease b. Increase; increase C. Decrease; decrease d. Decrease; increase e. Not change; not change
Federal expenditures and tax revenues that automatically change throughout the business cycle in such a way as to help stabilise an economic expansion or contraction are known as: Select one: a. good federal governance. b. self-perpetuating monetary policy. c. automatic stabilisers. d. self-perpetuating fiscal policy.
4. Consider the following demand and supply schedules of loanable funds. All figures are in billion dollars. Assume zero budget deficits and a closed economy. a. Interest Rate 12% 10% 8% 6% 4% 2% Quantity of Funds Demanded $200 $300 $400 $500 $600 $700 Determine the following equilibrium outcomes: (1) The interest rate. (ii) Private savings. (iii) Government (public) savings. (iv) Private business investment. Quantity of Funds Supplied $1000 $900 $800 $700 $600 $500
Consider the list of situations below faced by an imaginary country that is suffering an economic crisis. Classify each situation as either a result of discretionary fiscal policy or an automatic stabilizer in the economy. 1. Higher government spending in unemployment benefits due to a rise in the number of unemployed people II. A decrease in tax collection due to a decrease in business profits III. Higher public spending due to the introduction of a new emergency credit line for businesses, subsidized by the government IV. Smaller tax revenue resulting from an increase in the amount of households that fall under the poverty line V. Smaller tax revenue due to the approval of a bill that provides tax cuts for small businesses Group of answer choices A. Situations III and V are discretionary fiscal policy, and I, II and IV are automatic stabilizers B. All the situations above are automatic stabilizers C. All the situations above are automatic stabilizers, except for V D. Situations I and…
What is a default on the national debt? A. The Federal Reserve purchases Treasurys issued by the federal government. B. The federal government buys back its own debt from the holders of United States Treasuries by having the Treasury print money. C. The holders of United States Treasurys forgive the debt and provide the government with cash. D. The federal government declares bankruptcy or restructures the payments on its debts with the lenders.
According to Keynes, a. government spending should decrease during recessions. b. aggregate demand is most important to achieve potential output. c. aggregate supply is most important to achieve potential output. d. the government should not utilize fiscal policy to influence economic activity.