Q: Describe in one sentence what Ricardian equivalence implies for the government budget and the…
A: Ricardian equivalence is an economic theory proposing a link between government deficits and private…
Q: When the public debt is held by foreigners, it is not a real burden on real domestic output.…
A: Public debt is the total amount of money owed by a government to its creditors. It is the…
Q: The solution should be ai free The Marshall-Lerner condition for an effective devaluation…
A: BOP stands for Balance of Payments in economics. A meticulous account of every economic transaction…
Q: Future U.S. deficits could be decreased by Question 36 options: decreasing current and…
A: Below are the two reasons for the government deficit: *Excess government spending. *Low rate of…
Q: True or False Assume a closed economy in which C = 60 + 0.5(Y - T), G = 40, I = 40 T = 0, where C…
A: Y = C+I+G Y = 60+0.5(Y)+40+40 Y = 140+0.5Y 0.5Y = 140 Y = 280 Now, Private Sector Saving = S = Y -…
Q: Because Social Security payments are indexed, Congress: Multiple Choice can let their nominal…
A: We will answer the first question since the exact one was not specified. Please submit a new…
Q: If the economy above was at point D, a good thing to do would be to increase government spending.…
A: Increasing government spending or reducing government spending to energize a sluggish economy,…
Q: Which of the following statements accurately describes the crowding out effect? a. For a given…
A: Crowding out effect is a term used to indicate the ill effects of excessive government borrowing.
Q: Because of automatic stabilisers, the government budget will tend toward deficit during a…
A: Automatic stabilizers are a type of fiscal policy used by the government to stabilize the economic…
Q: 2. Using the aggregate demand and supply model (AD & AS), begin with an economy in a recession…
A: The total quantity of demand for all completed items and services produced in a given economy is…
Q: Future U.S. deficits could be decreased by options: increasing transfer payments and…
A: A fiscal deficit occurs when a government's total spending exceeds its total revenue in a given…
Q: 5. a) "Fiscal policy is completely crowded out in a small open economy with floating exchange rate…
A: The answer for both the parts is as follows:-
Q: a) In the open economy ISLM model, describe the effects of fiscal and monetary ex- pansions with…
A: “Since you have posted multiple questions, we will provide the solution only to the first question…
Q: Consider the IS-LM model of a small open economy at the equilibrium income, assuming a flat LM curve…
A: The steepness or levelness of the LM bend relies upon revenue flexibility of interest for cash.…
Q: In the IS-LM-BP framework, an increase in government spending leads to a
A: Government expenditure reduces savings in the economy, thus escalating interest charge. This can…
Q: Show the derivation of the foreign trade multiplier and calculate the foreign trade multiplier in an…
A: It is given that Consumption function of C = 60 + 0.4Y Import function of M = M0 + 0.2Y
Q: In an IS-LM model, consider a policymaker who wants to implement an expansion- ary fiscal policy to…
A: The IS-LM model represents the interaction of the goods market (represented by the IS curve) and the…
Q: For a small open economy with perfect capital mobility, fiscal policy cannot affect real GDP. while…
A: Economics is a social science that studies how individuals, businesses, governments, and societies…
Q: Following a tax cut by government, domestic investment will ________ and net exports will ________.…
A: A change in government tax collection affects the government budget. A change in the government…
Q: A hypothetical economy is given by the following identities: C = 3000 I = 2000 G = 2500 T = 0.2Y…
A: The Keynesian equilibrium is one of the macroeconomic models which would result in the aggregate…
Q: (Consider the Mundell-Fleming model with fixed exchange rates. Explain graphically the effect of…
A: The Mundell Fleming model is the prolonged version of the IS-LM model of the economy that integrates…
Q: 1. Multipliers, openness, and fiscal policy Consider an open economy characterized by the equations…
A: The question somewhere talks about fiscal policy and Multiplier. So Fiscal policy is the policy that…
Q: Fiscal policy and monetary policy often change at the same time. Suppose the government wants to…
A: Fiscal policy means the taxes or expenditure is used in such a manner that the IS curve shifts…
Q: Which of the statements below is true? * i O i = if 5 E2 LM BOP=0 IS Y At point E, the money market,…
A: IS-LM equilibrium: According to the IS-LM model, the equilibrium is achieved when the IS curve…
Q: 39. An economy described by the AS/AD model: C = 13+.8YD, I = 10, T = 10, t =.25, G = 35,…
A: Y = 13+.8YD + 10, T = 10, t =.25, G = 35, NX = 10-5P-.1Y AS = 5P.
Q: Explain what is meant by the current account multiplier in relation to a fiscal expansion, giving…
A: Economists and politicians have long been fascinated by the link among both fiscal policy and the…
Q: n a closed economy, suppose fiscal policy adds $500 bln in new government spending to GDP. Will the…
A: In a closed economy, if a fiscal policy adds $500 billion in new government spending to GDP, the…
Q: on a flexible exchange system using central bank's resources, show the effects of an expansionary…
A: Expansionary fiscal policy results in shifting the IS curve rightwards. This pushes the interest…
Q: A central bank whose sole purpose is to stabilize price growth will never cooperate with an…
A: Central bank is the apex Bank of the nation. The major aim of the central bank is to bring stability…
Q: The unwinding of the U.S. trade deficit: Suppose some shock occurs to theU.S. economy that makes…
A: Due to the sudden trade deficit, consumer will be left with less money in hand due to which there…
Q: Assume a system of flexible exchange rates and perfect capital mobility as well as equilibrium in…
A: With a flexible exchange rate currency, interest rates are determined externally and forex reserves…
Q: You are a member of the president's Council of Economic Advisers for the country of Manulo.…
A: The subject at discussion is fiscal policy, which refers to government acts affecting expenditure…
Q: SECTION 4: TRUE OR FALSE OR UNCERTAIN 25. According to the classical macroeconomic model,…
A: 25. According to the classical macroeconomic model, expansionary fiscal policy has an inflationary…
Q: Consumption: C = 1400 + .75*Yd + .08*(M/P) Net Exports: NX= 400 - .25*Yd – 10*r Тахes: T= -200 +…
A: Given: The consumption function is: C = 1,400 + 0.75*Yd + 0.8*M/P Net exports: NX = 400 - 0.25*Yd -…
Q: the only aim of the economy is to keep the equilibrium output level at the level of potential output…
A: IS curve represents the product market output-interest rate combinations where the aggregate demand…
Q: Assuming a fixed exchange rate policy, discuss the effectiveness of contractionary fiscal policy…
A: The fixed exchange rate system is when a currency is pegged with another or standard currency, there…
Q: With the aid of appropriate diagrams, briefly explain the impact of a fiscal restraint under an…
A: Fiscal restraint refers to a deliberate policy action taken by a government to reduce its level of…
Q: Refer to the above graph. Which factor will shift AD₁ to AD₂? Multiple Choice The real-balances…
A: It can be defined as a concept that affects the macroeconomic policy of a nation, In this concept…
Q: Crowding out can be observed in the national saving and investment identity formula S+(M-X) = 1 +…
A: When a government's spending exceeds its revenue in a particular fiscal year, a budget deficit…
Q: Of the four major economies , US, China, Japan, and Germany, which ones have also been running…
A: Budget Deficit:A budget deficit occurs when a government's expenditures exceed its revenues during a…
Q: Explain fiscal policy and give examples on how that could be applied to the current COVID economics…
A: Aggregate demand is the absolute demand for ultimate goods and services in a market.
Q: following equations that describe an open economy with government, where governmer ual $0. C = 320 +…
A: *Answer:
Consider the Mundell-Fleming model with fixed exchange rates. Explain graphically the effect of expansionary fiscal policy on output?
Step by step
Solved in 2 steps with 1 images
- Consider an open economy with a current population of 0.55 million people, and where the potential GDP is $ 3.24 billion. Consumer expenditure is represented by the following equation: C = 60+ 0.75DI. Exports are constant at $500 million, and investors want to spend $ 400 million at every level of income. The government purchases are $300 million, imports are constant at $ 450 million, and taxes are $200 million. - What is the current equilibrium level of real GDP? (report your answer at 2 decimal places and in millions of dollars)Consider a world with two countries, the US and Japan. Assuming the standard Keynesian assumptions, please answer the following questions: a) Assuming flexible exchange rates, suppose the US experiences a positive shock to their consumption function so that the entire consumption function for the US shifts upward. Give and explain two reasons why the consumption function would react in this way. b) Draw three diagrams (all pertaining to the US): on the top left, draw the Keynesian cross diagram, on the bottom left, draw an IS - LM diagram, and on bottom right, draw the FX market. Locate the initial point as point A and then show how each diagram is affected by the shock and label as point B, again, assuming flexible exchange rates. Now assume that the US and Japan are in a fixed exchange rate regime. Show how things change and label the new equilibrium, assuming fixed exchange rates as point C (Note: use the same diagrams - i.e., each diagram should have points A, B, and C). c) Explain…what would be your advice about fiscal policy? In that regard, you have three pieces of information
- If an economy has current account and budget deficits, the government should tighten fiscal policy. State whether this statement is True, False or Uncertain. Explain why using the Balance of Trade or Balance of Payments curve and use the accounting framework. What does current account refer to here exactly? What does a budget deficit mean in technical terms. Give equations for both. Also draw a diagram to illustrate necessary fiscal policy implications.Using the information below for the open economy model,a) Solve the equilibrium output step-by-step.b) Solve the trade balance step-by-step.c) Solve the fiscal balance step-by-step.Autonomous consumption → CA= 110Marginal propensity to consume → cY = 0.5Lump-sum tax collection → T = 50Income tax rate → t = 0.2Investment expenditure → I = 100Government expenditure → G = 100Exports → X = 100Marginal propensity to import → m = 0.3Solve the national-income model Y = C + lo + Go C = 160 + 0.55Y – 0.004Y² | Go = 0.25 Y %D where Io = 40 dan To 140. Does the government incur a budget surplus or a budget deficit according to this model?
- Please no written by hand and no emage Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes: C=40+0.5*(Y-T) Suppose G= 165 billion, I=50 billion, and T=10 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y=C+I+GY=C+I+G, the equilibrium output level is equal to _____ billion. Suppose the government purchases are increased by $100 billion. The new equilibrium level of output will be equal to _____ billion. Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to _____.A new foreign government is elected and announces that once it is inaugurated, it will expand government purchases permanently. What is the domestic economy's response to this announcement? Use the AA-DD framework to answer your question.Assume the following to answer the following questions: C= 1000+ .9 (Y-T) Tax rate = 0.1Y Imports = 0.1(Y-T) Government spending = 200 Investment = 300 Exports = 600 Potential Output = $8000 By how much must government spending increase or decrease to close this gap and bring the economy to Potential Output? Show your work
- The following table shows the approximate value of exports and imports for the United States from 2006 through 2010. Complete the table by calculating the surplus or deficit both in absolute (dollar) terms and as a percentage of GDP. If necessary, round your answers to the nearest hundredth. Year GDP Exports Imports Exports – Imports Exports – Imports (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of Dollars) (Percentage of GDP) 2006 13,399.00 1,471.00 2,240.30 -769.30 -5.74 2007 14,062.00 1,661.70 2,375.70 -714.00 -5.08 2008 14,369.00 1,843.40 2,553.80 -710.40 -4.94 2009 14,119.00 1,578.40 1,964.70 -386.30 -2.74 2010 14,660.00 1,837.50 2,353.90 -516.40 -3.52 Step 3 In 2006, Net Exports = $1471.0 - $2240.30 = -$769.30. Net Exports as percentage of GDP = -769.30 / 13399 * 100 = - 5.74% Similarly has been calculated for other years Between 2007 and 2008, the _____________ in dollar terms and…In an open economy, and given a horizontal LM curve, which one of the following statements is correct regarding expansionary fiscal policy action? (a) An increase in government spending will lead to an increase in output and demand, the exchange rate will depreciate and exports will decrease; (b) A decrease in taxes will decrease aggregate spending, the exchange rate will depreciate and net exports will increase; (c) An increase in government spending will lead to an increase in output and demand, the exchange rate will remain unchanged and imports will increase; (d) A decrease in taxes will increase output and demand, the exchange rate will depreciate and net exports will increase.Assuming there is no trade, if the Marginal Propensity to Save is 0.10 and the government increases spending by $4 billion, by how much will output rise?