Economics When is the IS curve vertical? Show the impact of expansionary fiscal policy, expansionary monetary policy in the case of vertical IS curve. Comment on the crowding-out effect.
Q: What is fiscal policy? And what are the different views on it from political platforms?
A: In economics, the term fiscal policy refers to the method by which a nation’s government adjust…
Q: What is meant by fiscal policy? How far can it be used to ensure, a high level of employment?
A: In a market economy, decisions are taken by the market forces and the government has limited…
Q: State any two objectives of fiscal policy?
A: According to the given question Gradually we can say that fiscal policy always leads to the…
Q: Describe the difficulties that can arise in implementing fiscal policy.??
A: Fiscal policy is known to be the policy in which the government uses three instruments which include…
Q: Which part of the AS curve fiscal policy works better and why?
A: Aggregate supply refers to the total value of goods and services available for purchase at a…
Q: What is an expansionary gap? What fiscal policy might close that gap?
A: Answer: Introduction: Expansionary gap: when the actual output level exceeds the potential output…
Q: How could fiscal policy alleviate the problem? What specific policy changes would be needed?
A: Everything involving public funding or taxes is referred to as fiscal. Fiscal policy refers to how…
Q: Under what conditions is expansionary fiscal policy the most effective at increasing output? Why?
A: Expansionary fiscal policy is the policy which is to be used to push back the equilibrium normal…
Q: when there is a budget deficit, wha happens to the S+KI curve
A: Understanding the effects of a budget deficit on the macroeconomic factors of savings, capital…
Q: What are some key factors that policymakers should consider when determining the optimal balance…
A: By efficiently allocating resources and encouraging investment, fiscal policy that strikes the ideal…
Q: What role does fiscal policy play in influencing aggregate demand and managing economic…
A: Fiscal policy refers to the use of government spending, taxation, and borrowing to influence the…
Q: What is expansionary fiscal policy? What is contractionary fiscal policy? Does expansionary fiscal…
A: In Keynesian macroeconomic theory, aggregate demand plays a very major role in stabilizing the…
Q: Discuss and draw the effectiveness of fiscal policy in the three-zone IS-LM model. In discussion,…
A: IS-LM Model: It refers to a model of investment-saving and liquidity preference-money supply. It is…
Q: What are the three fiscal policy tools and how would each be used to counter a contractionary gap?
A: Fiscal policy tools are the revenue and expenditure tools of the government undertaken to accomplish…
Q: Explain the Expansionary and Contactionary Fiscal Policy with the help of diagram.
A: Fiscal policy is used by the central government of the country or finance ministry of the country to…
Q: Explain what is Fiscal policy and how to use it in order to overcome the current inflationary…
A: Inflation is the rate at which the general level of prices for goods and services is increasing over…
Q: Write and apply the concept of multiplier with the help of suitable example and diagram. How does…
A: Fiscal policy: It refers to the policy which is used by the government to correct the various…
Q: What specific fiscal policy tools would you use to stimulate aggregate demand and how? also include…
A: Fiscal policy tools use to stimulate aggregate demand:To stimulate the aggregate demand, the fiscal…
Q: Which of the following is NOT a problem associated with implementing fiscal policy. a. Policy lags…
A: The issue is to establish one of the stated works that isn't a difficulty when inputting measures of…
Q: Using the appropriate aggregate demand and supply diagram, show any one instance where conducting…
A: The aggregate demand shows the negative relationship between price level and real GDP where goods…
Q: What is classes as an expansionary fiscal policy?
A: Fiscal policy is the government-imposed policy used to change economic conditions like demand,…
Q: Explain the 3 types of lag we should be concerned about when implementing fiscal policy?
A: When a policy is implemented there are certain lags due to the difference in the period when the…
Q: What is macro stability and resource mobilization in fiscal policy?
A: In an economy, fiscal policy implies the action of the government to influence the aggregate demand…
Q: Exchange rate, E E2 E¹ (2 DD2 * yf DD XX AA Output, Y
A: Macroeconomic analysis is central to modern economics, offering crucial information about a…
Q: Using the short-hand symbols G, Y, Md, r and I to demonstrate the effects of an expansionary fiscal…
A: The expansionary fiscal policy i.e. increase in public spending and reduction on taxes are the most…
Q: What issue or problem in the economy would be fixed with expansionary fiscal policy? Contractionary…
A: Expansionary-Fiscal policies are targeted towards increasing the consumption in the…
Q: an a reduction in the budget deficit and fiscal stimulus occur simultaneously? Explain your answe
A: Yes, it can go both ways they can maintain fiscal stimulus with a reduction in the budget deficit.…
Q: What are the tools of fiscal policy? Give sample and explain.
A: Fiscal policy refers to the use of taxation and government spending by the government to influence…
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- Do you think the typical time lag for fiscal policy is likely to be longer or shorter than the time lag for monetary policy? Explain your answer?Economics 1) Distinguish between discretionary and nondiscretionary fiscal policy. 2) Differentiate between expansionary and contractionary fiscal policy. 3) Plot the following markets on a graph: AD/AS graph: using 19.1 trillion for RGDP and 1.9% for inflation as point A (equilibrium). How will our AD/AS graph look like when U.S. government buys more military vessels (Shift the appropriate AD/AS curve on the graph)? 4) Plot the following markets on a graph: AD/AS graph: using 19.1 trillion for RGDP and 1.9% for inflation as point A (equilibrium). How will our AD/AS graph look like when Congress implements an income tax cut (Shift the appropriate AD/AS curve on the graph)?Determine how each of the following monetary or fiscal policy would shift the aggregate demand curve. Illustrate and explain the following effect. a. Assuming the economy is currently producing above the full employment output, the government decided to increase the personal income tax as a form of contractionary fiscal policy. Illustrate and explain the effect of the policy using AD-AS curve. b. With the recession due to COVID-19, the central bank has decided to lower down discount rates and reserve requirements of the commercial bank. Illustrate and explain the effect of the policy using AD-AS curve.
- Use the following graph to answer the next question. Price Level AS AD₂ AD₂ ADoi I Yo Y₁ Y₂ Y₂ Real GDP Suppose an economy's full employment output is at the level Y₁, and the economy's current aggregate demand is represented by AD2. If the government swiftly implements contractionary fiscal policy that immediately shifts the economy's aggregate demand to AD₁, the short to medium term aggregate demand would be most closely represented by AD₁Use the following graph to answer the next question. AD₂ Price Level AD AD₁ Multiple Choice O Suppose an economy's full employment output is at the level Q₁, and the economy's current aggregate demand is represented by AD2. If the government swiftly implements contractionary fiscal policy that immediately shifts the economy's aggregate demand to AD₁, the short-to-medium term aggregate demand would be most closely represented by ADO O AD₁. AD2- AD₂ AD3- Qo Q₁ Q₂ Q3 Real GDP ASP PE ж LRAS YN SRAS AD Y Consider the graphfor this and the next two questions. Assume the following graph depicts the situation in the US right before the financial crisis that recently engulfed the USA. Which curve would you shift in the graph to explain the initial impact of the financial crisis? Indicate the new position of the economy and what it implies. Prescribe a fiscal policy (contractionary or expansionary) policy you will use to bring the economy to its long-term full employment state.
- The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by changing taxes to reduce the burden of this recession. Fiscal Policy Price Level 140 130 120 110 100 90 80 70 60 50 LRAS $ AS AD₁ 40 0 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) billion AD Instructions: Enter your answer as a whole number. 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? $ b. If the MPC is 0.6, 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 0.92 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 S billion and taxes need to change by $[ billion.What is the Laffer Curve, and how does it relate to supply-side economics? Why is determining the economy’s location on the curve so important in assessing tax policy?-SRAS PL, PL AD2 AD Y,Y2 REAL GDP The Aggregate Demand Model shows an increase in Aggregate Demand or GDP, Which type of Fiscal Policy was used to cause this change and why? Expansionary Policy to raise GDP and lower the unemployment rate Expansionary Policy to raise GDP and lower Inflation Contractionary Policy to decrease GDP and lower the unemployment rate Contractionary Policy to increase GDP and Increase Inflation PRICE LEVEL
- 10.2 In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment?Explain. a)When the investment accelarator is large or when it is small? 11.1 Explain how each of the following developments would effect the supply of money,the demand for maoney, and the interest rate.Illustrate your answers with diagrams. e)A wave of optimism boosts business investment and exapands aggregate demand.Question 14/28 > NEX A BOOKMARK 14 MULTIPLE SELECT: If the government decides to pursue a expansionary policy, which of the following options could it use? Pick all that apply. A Tax cuts B Tax increases c Spending cuts D Spending increases DELL @ # & 1 3 4 7 8. W e r y d f k 个Exercise 4 Use a combination of text and drawing of figures when answering the following questions: a) Discuss the effect of an expansionary fiscal policy using the IS TR model. Why doces the interest rate change and what does it mean for the Keynesian multiplier? b) How will the answer from the previous sub-question change if: i. the inflation targeting of the Central Bank became more flexible? ii. the country opens up like after a pandemic leading to more imports? c) Explain the difference between the effect of an expansionary fiscal policy using an IS- TR-IFM model comparing Norway and Denmark as examples of countries with different exchange rate regimes. d) Assume a model where actual inflation depends on 1. Underlying inflation, 2. Output gap and 3. Supply chock. Explain in a diagram with an aggregate supply curve (AS) and using numbers for each of these three factors, the outcome in the short run and in the long run, if a negative supply shock like a war occurs.