Fiscal Policy: End of Chapter Problem Examine what the "three difficulties with using fiscal policy" look like in real life. Categorize cach of the following three stories as either crowding out, magnitude, or a matter of timing. a. During a recession, the State of New York hires 1,000 new trash collectors. The state legislature in Albany takes six months to pass a law to hire the new trash collectors. Then, because of government rules and paperwork, the government actually hires the workers 18 months after the recession has begun. The difficulty is____________. b. During a recession, the State of New York hires 1,000 new trash collectors. Five hundred of the new trash collectors, however, were just people who quit their jobs as restaurant employees to take the better-paying trash collector jobs. The difficulty is_____________. c. During a recession, the State of New York hires 1,000 new trash collectors. However, during the course of the recession, 300,000 additional people in New York lose their jobs. The difficulty is_____________. In India, the economy grows faster when there's a lot of rain and grows more slowly when there is a drought. This creates big fluctuations in the economy. Suppose the government wrote laws to smooth out these fluctuations by paying people to work more in the dry years and by taxing people so that they would work less in the heavy-rain years. Would the laws make the average Indian better off? Why or why not? The laws would probably make the average Indian____________ off because
Fiscal Policy: End of Chapter Problem
Examine what the "three difficulties with using fiscal policy" look like in real life. Categorize cach of the following three stories as either crowding out, magnitude, or a matter of timing.
a. During a recession, the State of New York hires 1,000 new trash collectors. The state legislature in Albany takes six months to pass a law to hire the new trash collectors. Then, because of government rules and paperwork, the government actually hires the workers 18 months after the recession has begun.
The difficulty is____________.
b. During a recession, the State of New York hires 1,000 new trash collectors. Five hundred of the new trash collectors, however, were just people who quit their jobs as restaurant employees to take the better-paying trash collector jobs.
The difficulty is_____________.
c. During a recession, the State of New York hires 1,000 new trash collectors. However, during the course of the recession, 300,000 additional people in New York lose their jobs.
The difficulty is_____________.
In India, the economy grows faster when there's a lot of rain and grows more slowly when there is a drought. This creates big fluctuations in the economy. Suppose the government wrote laws to smooth out these fluctuations by paying people to work more in the dry years and by taxing people so that they would work less in the heavy-rain years. Would the laws make the average Indian better off? Why or why not?
The laws would probably make the average Indian____________ off because
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