For each of the following scenarios, determine which time lag is most likely to result when designing and implementing fiscal policy. a. The separation of power demonstrated between the legislative and executive branches of government combined with strong partisanship attitude among our elected politicians. . . . . All of these lags . b. The fact that it takes economists working for the National Bureau of Economic Research months to declare the dates of peaks and troughs. . . Recognition lag Legislative lag . Implementation lag . . . All of these lags c. The time it takes to design and build new infrastructure after these projects have been passed by the legislature. Recognition lag Legislative lag Implementation lag Recognition lag Legislative lag Implementation lag

For each of the following scenarios, determine which time lag is most likely to result when designing and implementing fiscal policy. a. The separation of power demonstrated between the legislative and executive branches of government combined with strong partisanship attitude among our elected politicians. . . . . All of these lags . b. The fact that it takes economists working for the National Bureau of Economic Research months to declare the dates of peaks and troughs. . . Recognition lag Legislative lag . Implementation lag . . . All of these lags c. The time it takes to design and build new infrastructure after these projects have been passed by the legislature. Recognition lag Legislative lag Implementation lag Recognition lag Legislative lag Implementation lag

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The task I am struggling with: The accompanying diagram shows the current macroeconomic situation for the economy of Albernia. You have been hired as an economic consultant to help the economy move to potential output Yp. a) Is Albernia facing a recessionary or inflaniotary gap? b) Which type of fiscal policy – expansionary or contractionary – would move the economy of Albernia to potential output Yp? What are some examples of such policies? c) Illustrate the macroeconomic situation in Albernia with a diagram after the succesful fiscal policy has been implemented. Thank you very much for your help.
Which of the following is a reason for using expansionary fiscal policy during a recession? a) reduce unemployment b) All of the choices are correct c) help the economy return to full employment d) help increase GDP, job opportunities, and production in the economy e) increase employment
The U.S. is in a recession due to decreased Aggregate Demand in the economy. Should the government use Keynesian or Supply Side fiscal policy to counter the contraction? Explain using specific government actions (at least 2). 1 paragraph.
Explain the difference between “active” discretionary fiscal policy advocated by mainstream economists and “passive” fiscal policy advocated by new classical economists. Explain: “The problem with a balanced-budget amendment is that it would, in a sense, require active fiscal policy—but in the wrong direction—as the economy slides into recession.”
Classify each statement as an example of expansionary fiscal policy, contractionary fiscal policy, or not an example of fiscal policy. Expansionary fiscal policy Contractionary fiscal policy Not an example of fiscal policy
a) What are the three fiscal policy tools and how would each be used to counter a contractionary gap? b) True or False and explain: Fiscal Policy is effective at reducing the duration of an economic contraction. c) True or False and explain: Households always react to tax changes in a predictable manner.
What type of fiscal policy would be appropriate to use during a recessionary period? How might this affect aggregate demand, unemployment, and inflation?
What are the three lags that can affect the appropriate timing for effective fiscal policy changes? What does this imply for the policy goal of reducing the severity of the peaks and troughs of the business cycle?
When governments implement contractionary fiscal policy to increase taxes, which of the following is most likely to happen for the economy in the short run? Real GDP falls and price level rises Real GDP falls and price level falls Real GDP rises and price level rises Real GDP rises and price level falls.
10. Legislative lags associated with fiscal policy are due to all of the following, except: the political infighting involved in approving changes in government spending or taxes the poor and conflicting data available to policymakers. the delays in assessing the real state of the economy. the forecasting deficiencies of econometric models.
Outline the supply-side view of fiscal policy. How does this view differ from the various demand-side theories? Would a supply-side economist be more likely to favor a $500 tax credit or an equivalent reduction in marginal tax rates? Why?
Gokhale and Smetters (2003) found that the long-run fiscal imbalance in the U.S. government budget is caused A - by large discretionary expenditures. B - solely by entitlement programs for the elderly, largely Medicare. C - solely by entitlement programs for the elderly, largely Social Security. D - by government support programs for the poor.