Another part of the initial fiscal response to the Covid-19 recession were checks sent to every ad and child ($1200 per adult and $600 per child). Which of the following is NOT a reason why these checks might have a low fiscal multiplier? O Many households save most or all of the checks rather than spending them because they are afraid an even bigger shock is on its way. Since many parts of the economy are shut down, households are unable to spend to their checks on additio consumption. The government borrowing to fund these checks crowds out private investment. O The checks encourage households to buy more from online retailers.

Another part of the initial fiscal response to the Covid-19 recession were checks sent to every ad and child ($1200 per adult and $600 per child). Which of the following is NOT a reason why these checks might have a low fiscal multiplier? O Many households save most or all of the checks rather than spending them because they are afraid an even bigger shock is on its way. Since many parts of the economy are shut down, households are unable to spend to their checks on additio consumption. The government borrowing to fund these checks crowds out private investment. O The checks encourage households to buy more from online retailers.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Role And Effects Of Government

Section: Chapter Questions

Problem 5QP

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explanation. Be sure to exp Assume the United States has been in another recession for the past 10 months. Unemployment is 10% and GDP has dropped $1.9 trillion from its previous peak of $ 20.8 trillion. The housing and heavy equipment industries have been hit the hardest. Inflation has been near the 2% target but has started to dip below. Also, the countries average MPC is 60. Determine the best fiscal policy/strategy to help the economy recover and explain why it is the best choice. Be sure to reference Aggregate Demand and Aggregate Supply and explain your specific tools in your answers. Calculations Explanation Graph (More space for the explanation on the back)
The marginal propensity to consume (MPC) for this econamy is . and the spending multiplier for this economy is Suppose the govemment in this economy decides to decrease govemment purchases by $250 bilion. The decrease in government purchases will lead to a decrease in income, generating an initial change in consumption equal to second change in consumption equal to This decreases income yet again, causing a The total change in demand resulting from the initial change in government spending is The following graph shows the aggregate demand curve (AD ) for this economy before the change in govemment spending. Use the green line (trangie symbol) to plot the new aggregate demand curve (AD:) after the multiplier effect takes place. For simplioity, assume that there is no "crowding out." Hint: Be sure that the new aggregate demand curve (AD) is paralel to the initial aggregate demand curve (AD). You can see the slope of AD by selecting t on the graph. 540 AD. AD, 130 100 OUTPUT (Tions of…
The recent economic recession was brought about by the Covid-19 pandemic. The pandemic brought along mitigation efforts such as stay-at home/shelter in place orders, cancelling of large gathering, social distancing, etc,. What impact have these mitiation efforts likely had on the MPC and the multiplier in the U.S. economy? What does this imply about the effectiveness and level of fiscal policy needed to bring the U.S. economy out of the recession.
Explain how the fiscal policy tools used by the federal government should work in terms of fighting a recession such as that brought about by the COVID-19 pandemic. Then explain why fiscal policy may have proven less effective in the face of this pandemic than in previous recessions.
Suppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that an upcoming political election causes anxiety among consumers and consumption falls. Show the effects on your graph and label the new equilibrium point "2." Lastly, our government wants the economy to return to full-employment as quickly as possible. Should it intervene? If so, show the impact of successful fiscal policy on your graph. Label this new equilibrium point "3."
Suppose that you are a member of the Council of Economic Advisers. The president has asked you to prepare a statement on the question, "What is the proper fiscal policy for the next 12 months?" Pre-pare such a statement, indicating (a) the current state of the economy (that is, the unemployment rate, growth in real income, and rate of inflation) and (b) your fiscal policy suggestions. Should the budget be in balance? Explain the reasoning behind your suggestions.
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Crowding out is on the minds of many policy analysts currently as the government borrows more than $1 trillion annually, leading them to question whether or not the government can actually stimulate the American economy. Explain in words what is meant by crowding out, relate it to the size of the fiscal multiplier and show it on a graph of IS-LM. When is crowding out minimal and when is it large? Explain and draw the graphs. Lastly, crowding out need not ever really be an issue, at least in theory. Show, using the IS-LM model, how crowding out by fiscal policy can be offset by some other policy action.
What is the spending multiplier for the north laurisian economy
'The U.S., world's largest economy, went into recession in February of 2020. It has taken a broad range of steps to combat the economic disruption caused by COVID-19. In response to this crisis, governments have enacted sweeping and sizable fiscal stimulus of trillions of dollars.' Is it an appropriate policy response if the primary responsibility of the government is to maintain economic growth? Explain the significance of Fiscal policy for an economy? Is there any difference in the two approaches of fiscal expansion through - direct transfer benefit and government spending directly on purchase of goods and services that may influence real GDP? What role does multiplier play? Explicate. Support your answer with the suitable diagram/s.
1) Define MPC(marginal propensity to consume) and MPS(marginal propensity to save) 2) Define multiplier effects, based on Keynesian Fiscal policy. 3) When economy falls into a recession, what kind of fiscal policy is needed? Give a specific tool of fiscal policy. 4)Discuss the long run effects of "Crowding out" due to a short run expansionary fiscal Policy. 5) Treasure Hunt: a) Go to www.cengage.com/sso (Links to an external site.)Links to an external site. web site. At Bookshelf of Arnold economics of 11th edition, click Economics Course Mate of Economics(11th ed) by Roger A Arnold . Then, click "select chapter" for Ch 11 and try Ch11: Fiscal policy to get access to " Video Office hours " left menu bar. Summarize the contents of "Video Office hours". (3 points) b) Summarize the contents of "Working with Diagrams" of Ch 8 , 9 , 10…