Answered: b) What does the IS-LM-PC model imply…

Business

Economics

b) What does the IS-LM-PC model imply about the MR effects of fiscal expansion? When is a fiscal expansion needed?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1E

See similar textbooks

Related questions

Q: The following events shift either aggregate demand, aggregate supply, both or neither. Using a…

A: Aggregate demand = C + I + G + (X-M), C= consumption, I= Investment, G= Government spending, (X-M)…

Q: government budget shows a primary deficit of 8200 the revenue expenditure on interest payment is 100…

A: Literally in the exact word we can say that the fiscal deficit is known to be as the amount or the…

Q: Discuss why some countries may shield some sectors from international competition? Provide real-life…

A: Economies have various reasons to adopt protectionist measures life tariffs and quotas in order to…

Q: Which of the following is not an advantage of Foreign Banks?

A: Volatility measures the deviation of value from the mean. Higher the deviation, higher will be…

Q: How much money be invested today in order to withdraw P1500 per year at the end of each year for 8…

A: Given :Number of Periods/Years (n) = 8Rate of Interest (r) =8%Regular Withdrawal (A) = $ 1500 PV =…

Q: I. Nominal GDP and Nominal GDP per capita can best measure the quality of living and standard of…

A: The measure that depicts the final value of goods and services that are being produced in an economy…

Q: The following data applies for example problems 8.1 through 8.3. A company is considering the…

A: Here we calculate the equivalent annual cost of machine B by using the given information and choose…

Q: O both the noncompetitive firm and the purely competitive firm.

Q: 2/31/5 Question 7: Given the utility function U = xx. Calculate the particular value of MRCS for he…

A: Marginal Rate of substitution refers to the rate at which consumer substitutes one good for other…

Q: Marginal Average Marginal Total Output Price Revenue Total Cost Cost 1 $ 100 $ 100 $ 100.00 $30 90…

A: Monopoly is a single firm in the market selling unique good with no close substitutes.

Q: Find the amount needs to be invested if the investors want to receive an annual net income worth…

Q: What are some of the difficulties and issues that consumers have while using a system that is not…

A: Being able to provide excellent customer service is a competitive advantage. The bottom line is that…

Q: Question 8 In the long run, a firm can increase its output quantity, but it will be limited by the…

A: In economics, the output is termed as the number of goods and services manufactured by the firms for…

Q: The manager of a firm in a monopolistically competitive industry is giving some thought to two…

A: Given information Own price elasticity=-2.5 Advertisement elasticity=0.7 Marginal cost =$30 Annual…

Q: 7) Assume that a $1.00 increase in exports increases GDP by $3.00, and å income increases import…

A: Given information: A $1 increase in exports will increase the GDP (or income) by $3. And a $1…

Q: The unemployment caused by minimum wage would be larger if Question 2 options: both labor demand…

A: Minimum wage is an example of price floor which is the minimum price that must be paid.

Q: A wastewater treatment facility is planning to purchase a new sludge dryer equipment to replace its…

A: Rate of return for a project or the internal rate of return for a project, denoted as IRR, is…

Q: To increase a company's profit, a manager suggests that the company needs to increase the value of…

A: Answer: Profit per unit is the difference between the price of the product and the average cost of…

Q: a) Graphically illustrate equilibrium in the bond market.

A: The interest rate and bond price have an inverse relationship exist between them. The price of bonds…

Q: Question 7 Suppose there are two types of individuals: Low demand individuals with demand Qp(P) =…

A: An individual's demand for a product or service is known as individual demand (or a household). This…

Q: A risk-neutral worker can choose to exert either low or high effort. The manager cannot observe the…

A: Given; Low effort:-Cost of workers= $0Prob (Rev=$200)=80%Prob (Rev=$600)=20%High effort:-Cost of…

Q: 21. It takes y* years to graduate from college. For workers in Group A (high-skill workers) the cost…

A: High type is getting payoff of 60,000 and low type is getting a payoff of 30,000.

Q: What does Scott omit from his analysis that Irvin argues is a necessary component of a full…

A: a circumstance wherein a nation purchases more from different nations than it offers to different…

Q: Which of the following would cause the money supply curve to shift to the left? Select one: a. A…

A: Federal Reserve is the organization that is responsible for managing money supply in the economy

Q: Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion…

A: Since the question you have posted consists of multiple parts, we will answer the first three parts…

Q: 1) If nominal GDP is $7636.0 billion and the GDP deflator is 130.2, then what is real GDP? 2) If the…

A: Nominal GDP is the GDP which is calculated without taking into the effect of inflation rate. Also…

Q: es frequently push back from the gate on time, but then wait 2 feet away from the gate until it is…

A: How consumers and organizations answer market signals like costs and monetary advantages.

Q: 1) The value function is an essential element of Prospect Theory. Describe the key features of the…

A: The prospect theory says that investors value gains and losses differently, inserting a lot of…

Q: 1. An electric utility investment has a capital cost of $60 million, a term of 8 years, and an…

A: Under the Strata Property Act, strata corporations and sections must have contingency reserve funds…

Q: What is are the economical impacts of increased minimum wage? (Example: from years 2015-2021

A: Wage refers to the payment that employers pay workers for their labor. It could be based on hourly…

Q: can you explan step by step how (100-q2)q2-10q2 turned into 100-2q2-10=100?

A: The profit function has been differentiated here.

Q: Explain what is/are the advantage might Generation Y have in terms of education and income advantage

A: Generation Y have a set of abilities and characteristics that distinguish them as desirable…

Q: When the price changes, the change in producers’ total revenue depends on the elasticity of demand.…

A: Total revenue refers were total amount of money earned by the firm by selling of specific unit of…

Q: Motor A and B is providing 150hp and it is being used for 10 hours per day, 250 days in a year if…

A: Let x be the number of pieces of model A and y be the number of pieces of model B. Let total profit…

Q: 32 trillion.

Q: Section A Answer the following question. a) Assume that a country is suffering from rising inflation…

A: Answer a. The government can impact the level of economic activity by adopting proper monetary…

Q: Louis is trying to decide what combination of cups and plates to buy. His budget is $12. Plates cost…

A: The information given is as follows:- Louis is trying to decide what combination of cups and plates…

Q: MC ATC D f g MRh j Output Dollars

A: We have downward slope kinked demand and marginal revenue.

Q: MULTIPLE CHOICE (identify the one best answer and provide explanations): Consider an economy in…

A: Growth is the rise in a country's production per capita over a lengthy period of time. Technological…

Q: Consider the market for dresses. Suppose a decrease in tariffs allow manufacturers of dresses to…

A: Equilibrium in the market of goods occurs at the intersection of demand and supply curves

Q: 1. Consider the two-player game L R T 2,7 0,0 B 2,0 3,1 (a) Find the set of (pure and mixed) Nash…

A: Given pay off matrix Player 1 has 2 strategy T and B Player 2 has 2 strategy L and R

Q: What is meant by the full employment or the natural rate of unemployment? Which type of unemployment…

A: In an economy, unemployment refers to the situation when labor supplied exceeds labor demand in the…

Q: I. Autonomous consumption is always positive II. Consumption is always positive III. The marginal…

A: Consumption function: C = c + MPC * Y Where C is consumption c is autonomous consumption, i.e., the…

Q: Output 1 2 3 4 7 8 Total Cost 12 20 26 32 40 52 68 93 122 LO

A: In a perfectly competitive market, there are many firms producing identical goods. Firms do not have…

Q: What happens to the money supply when the Fed buys government bonds? According to the theory of…

A: MONEY SUPPLY Money supply refers to the volume of currency regulated in the economy during a period…

Q: What is the difference between an expansionary(inflationary gap) gap and…

A: recessionary gap A recessionary gap occurs when a country's real gross domestic product (GDP) falls…

Q: When conducting a hypothesis test for a given sample size, if a is increased from 0.05 to 0.10, then…

A: When the hypothesis are settled, Type I error will be said as the probability to reject the true…

Q: The following are market demand and supply equations for a perfume product: QD = 70 − 4P QS = 10 +…

A: The demand curve is a downward sloping curve which indicates the negative relationship between price…

Q: 5. The Bertrand model of duopoly can be understood as a(n) a. Matching pennies game b. Prisoner's…

A: Answer - Bertrand Model :- It is model where each firm has similar goods and they try to compete…

Q: A consumer has utility u(I) = VI and income $1,000. When sick, the consumer must go to the doctor,…

A: U = I0.5 Income = $1,000 Visiting the doctor without insurance = $400 Probability of getting sick…

Question

b) What does the IS-LM-PC model imply about the MR effects of fiscal expansion? When is a
fiscal expansion needed?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1 INTRODUCTION

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Using the IS-LM model (including the Money Market diagram), show the full effect of a con- tractionary fiscal policy (e.g. AG < 0) on the economy. Compare the new equilibrium to the initial equilibrium, commenting on output Y, the interest rate r.
Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of an expansionary fiscal policy. Label the initial point prioer to the fiscal policy as A and the new point following the expansionary policy as B.
Consider the IS/LM model. Show the effects of the following policies on Y and r on a graph: a) Contractionary fiscal policy b) Expansionary fiscal policy
Explain by means of aggregate demand equation and IS-LM model graphs the concept behind Fiscal Policy and how Fiscal Policy is different from Monetary policy.
please explain this question in words. Assume that fiscal policy can be accomplished by changing only one of G and T. In the IS-LM framework, suppose the effect on the general equilibrium output is the same between expansionary fiscal policy and expansionary monetary policy. Which one would you expect to have a greater impact on the equilibrium consumption?
What is the crowding-out effect? How does it modify the implications of the basic Keynesian model with regard to fiscal policy? How does the ne classical theory of fiscal policy differ from the crowding-out model?
Which of the following could NOT be contractionary fiscal policy tool? OA) decreasing government expenditure OB)decreasing taxes Oc) decreasing transfer payments
Which of the following statements about Fiscal Policy is INCORRECT (a) In order to combat inflation, the South African Reserve Bank must apply a contractionary fiscal policy; (b) A contractionary fiscal policy can result in higher levels of unemployment; (c) Expansionary fiscal policy will increase the budget deficit; (d) The application of fiscal policy will have no effect on aggregate supply in the AD‐AS model. If the inflation rate is 6% and Susan receives a 6% increase in income, then, over the year, Susan’s: (a) Real and nominal income both remain unchanged; (b) Real and nominal income both rise; (c) Real income rises but nominal income remains unchanged; (d) Nominal income rises but real income remains unchanged. Given the import function, Z = 300 + 2/3Y, which of the following statements is correct? The marginal propensity to save is 1/3; The induced component is 300; 2/3 is the proportion of any income spent on imports; None of…
Explain the impact of a tax cut on income, the interest rate and money demand in the IS-LM model. Explain what happens to the position of the LM curve as policy makers pursue expansionary fiscal policy.
“Expansionary fiscal policy is more effective in influencing the aggregate income level when investment is interest-elastic”. Do you agree with this statement? Why and why not? Explain your answer based on the IS-LM framework.
Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Using the AD-AS model and IS-LM model illustrate the impact of an expansionary fiscal policy. Label the initial points in both diagrams as A and the new points following the policy change as B. If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of an expansionary fiscal policy. Label the initial point prioer to the fiscal policy as A and the new point following the expansionary policy as B. explain the reasons that underly differences in policy effectiveness.
Which of these statements about automatic stabilisers is true? a) They eliminate the fluctuations associated with the business cycle b) They form part of discretionary fiscal policy c) They come into play as soon as aggregate demand fluctuates d) They eliminate fiscal drag