s in es Assume that US output and employment has collapsed. What is the likely policy response from our macro-policy makers?. None of the statements are correct. The president and congress will adopt an expansionary monetary policy by lowering interest rates. The Federal Reserve will adopt a contractionary monetary policy by raising interest rates. The president and congress will adopt an expansionary fiscal policy of increasing the supply of money. The president and congress will adopt an expansionary fiscal policy of tax increases. Moving to the next question prevents changes to this answer. !!! JUL 21 tv 10 A A

s in es Assume that US output and employment has collapsed. What is the likely policy response from our macro-policy makers?. None of the statements are correct. The president and congress will adopt an expansionary monetary policy by lowering interest rates. The Federal Reserve will adopt a contractionary monetary policy by raising interest rates. The president and congress will adopt an expansionary fiscal policy of increasing the supply of money. The president and congress will adopt an expansionary fiscal policy of tax increases. Moving to the next question prevents changes to this answer. !!! JUL 21 tv 10 A A

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When the demand for money as a medium of exchange is high, the impact of fiscal policy on aggregate product is magnified by the crowding out effect. Select one: O True O False Check
Which statement is most likely consistent with the classical view? O The Congress should set interest rate targets. The monetary policy is more effective than Keynesian theory. Fiscal policy works better than monetary policy. O Fiscal and monetary policies cause more economic instability than stability.
Given the aggregate demand function, AD = C+ I, + G +X - IM, a contractionary fiscal policy casues AD to do what? Shift to the left. Causes no shift. Cannot be determined. Shift to the right.
Increasing the public debt can be associated with an expansionary fiscal policy. an expansionary monetary policy. a contractionary fiscal policy. a contractionary monetary policy. 29. а. b. с. d.
Start with a brief introduction that explains use of Government policy to control the economy. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both. What specific fiscal policy tools would you use to stimulate aggregate demand and how? What specific monetary policy tools would you use to stimulate aggregate demand and how? What is your conclusion, should policymakers use the monetary and or fiscal policy, or a combination of both, to stimulate aggregate demand? Explain your reasoning.
The graph below depicts an economy where an increase in aggregate demand has caused Inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring Inflation under control. Price Level 160 150 140 130 120 110 100 90 80 70 60 50 Fiscal Policy LRAS AS Real GDP (billions of dollars) AD₁ AD 40 80 160 240 320 400 480 560 640 720 800 Instructions: Round your answers to 2 decimal places. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.75, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose Instead that the MPC is 0.5. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.
In the most recent FOMC meeting, the Federal Reserve increased the Federal Funds rate. By doing this, this suggests the Federal Reserve: a is willing to sacrifice jobs to keep prices stable b is willing to sacrifice higher prices to save jobs c believes the Federal Funds rate is not important d is trying to counter fiscal policy actions
If the equilibrium real GDP were higher than potential GDP, then a contractionary fiscal policy would cause the inflation rate to be ________ and real GDP to be ________. a. higher; higher b. higher; lower c. lower; higher d. lower; lower
The response of the economy to fiscal consolidation a. Use an IS-LM diagram to show the effects on output of a decrease in government spending. Can you tell what happens to investment? Why? b. Discuss the effects of fiscal consolidation on budget deficit and equilibrium output. How can monetary policy offset the effects of fiscal consolidation on output?
When the economy id experiencing a recessionary gap, how can expansionary monetary policy affect real output and the price level? An expansionary monetary policy can result in decreased real output and an increased price level. An expansionary monetary policy can result in increased real output and a lower price level. An expansionary monetary policy can result in decreased real output and a lower price level. An expansionary monetary policy can result in increased real output and an increased price level.
Determine whether the following items are examples of expansionary fiscal policy, contractionary fiscal policy, expansionary monetary policy or contractionary monetary policy as they affect the aggregate demand of an economy. 1. A Significant treasury bond buyback *a. Expansionary fiscal policyb. Contractionary fiscal policyc. Expansionary monetary policyd. Contractionary monetary policy 2. Issuance of new treasury bonds at a higher interest rate *a. Expansionary fiscal policyb. Contractionary fiscal policyc. Expansionary monetary policyd. Contractionary monetary policy