(b). Suppose an economy is in recession with historically high unemployment. Using the Keynesian income-expenditure model, explain how an expansionary fiscal policy, involving a reduction in the marginal tax rate can reduce the unemployment rate. What does your explanation suggest about using the overall budget balance as an indicator of the stance of fiscal policy?

(b). Suppose an economy is in recession with historically high unemployment. Using the Keynesian income-expenditure model, explain how an expansionary fiscal policy, involving a reduction in the marginal tax rate can reduce the unemployment rate. What does your explanation suggest about using the overall budget balance as an indicator of the stance of fiscal policy?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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