5. a) "Fiscal policy is completely crowded out in a small open economy with floating exchange rate according to Mundell-Fleming Model". How does it differ from crowding out of fiscal policy in a closed economy? b) Briefly discuss how time lag could be an argument against policy activism. What is the role of automatic stabilizers in this context?

5. a) "Fiscal policy is completely crowded out in a small open economy with floating exchange rate according to Mundell-Fleming Model". How does it differ from crowding out of fiscal policy in a closed economy? b) Briefly discuss how time lag could be an argument against policy activism. What is the role of automatic stabilizers in this context?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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No. 6 Consider the following equations for this particular economy. C = 100+ 0.75Yd I = 150 G = 250 T = 200 X = 100 Q = 0.25Yd a. What is the equilibrium level of income of this economy? Is the trade balance in deficit or surplus? By how much? b. Suppose there is an increase in government expenditures by 50. What is the effect on the equilibrium level of income? What is the effect on the trade balance? Explain your answers. C. This question is independent of Question (b). Suppose exports increase by 50. Compared to you answer in (a), what is the effect on the equilibrium level of income and on the trade balance? Explain your answers.
Explain the difference between fiscal policy and monetary policy. Explain also 2 advantages and 2 disadvantages of both policies.
Crowding out can be observed in the national saving and investment identity formula S+(M-X) = 1 + (G-T) If the national savings (S) and the trade balance (M-X) do not change, then increased budget deficits could have all of the following effects EXCEPT: a. private investment will fall b. investments could be made in public projects which are less productive than private investments C. investments could be reduced or delayed in important physical plant and equipment d. interest rates will fall hurting financial institutions who earn higher profits with higher interest rates
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Multiple choice questions. Color only one correct answer 4- Each country that joins the EU: a- Can no longer use automatic stabilizers as part of its economic policies; b- Has more discretion to use economic stabilizers as part of its economic policies; c- Do not observe any change in the use of automatic stabilizers.
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 -true
How would I do a and b?
"Assuming a closed economy, if the government decides to increase its spending by $100 million without increasing taxes, explain how this fiscal policy might affect the national income, interest rates, and investment levels according to the Keynesian economic model. Additionally, discuss the potential crowding-out effect that might occur as a result of this increased government spending."
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Given the following closed economy model: C = .8Yd + 800I = 1000 G = 6000 T = .25Y + 100 Yf = 21,000 In equilibrium the Federal budget deficit will be: Use an integer value and no dollar sign or negative sign.