In preparing their estimates of the stimulus package's effect on GDP, Obama administration economists estimated a government purchases multiplier of 1.57. Economist Robert Barro argues that the government purchases multiplier would be lower than the administration's estimate, and economists Lawrence Christiano, Martin Eichenbaum, and Sergio Rebelo argued that the multiplier would be higher than the administration's estimate. O when the unemployment rate is high; when the value of the dollar is depreciating against foreign currencies when the federal budget is in surplus; when government transfer payments are declining O during wartime; when short-term interest rates are near zero O during a recession; when the inflation rate is relatively low

In preparing their estimates of the stimulus package's effect on GDP, Obama administration economists estimated a government purchases multiplier of 1.57. Economist Robert Barro argues that the government purchases multiplier would be lower than the administration's estimate, and economists Lawrence Christiano, Martin Eichenbaum, and Sergio Rebelo argued that the multiplier would be higher than the administration's estimate. O when the unemployment rate is high; when the value of the dollar is depreciating against foreign currencies when the federal budget is in surplus; when government transfer payments are declining O during wartime; when short-term interest rates are near zero O during a recession; when the inflation rate is relatively low

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What are the reasons of fiscal policy not being effective in an economy according to classical economists?
"Even if there is full information and that wages and prices are fully flexible as what the Classical economists believe, an expansionary fiscal policy can still change the output of the economy" Outline an economic model that explains this possibility.
Which of the following is NOT an automatic stabilizer? a. income taxes b. unemployment insurance c. Medicaid d. food stamps e. monetary policy
You are the Secretary of the Treasury, working with the president to implement appropriate policies. Currently, actual GDP is below potential output and falling. To stabilize the economy, you'd recommend fiscal policy, which could include a. expansionary; increased government purchases and tax cuts b. expansionary; decreased government purchases and a tax increase c. contractionary; increased government purchases and tax cuts d. contractionary; decreased government purchases and a tax increase
Fiscal policy creates a multiplier effect because O The government always runs a deficit Government spending and tax changes will generate even more government spending O Government spending and tax changes will cause other economies to do the same thing. Government spending and tax changes will generate additional changes in consumer spending, creating more jobs, production and even more ripples of additional spending
Suppose that the fiscal policy multiplier is 8.6. What is MPC? Use that MPC and assume that there is no crowding out in this economy. If the federal government knows that it will take a $750 billion rightward shift in AD to end a recession, how much does government spending need to be raised to accomplish that?
Discuss the challenges of predicting the effects of discretionary fiscal policy on aggregate economic activity.
Fiscal policy of increasing government expenditures can be more potent than monetary policy in getting us out of a recession because Question 44 options: Monetary policy takes a lot of time to implement there is no lagged effect of fiscal policy on GDP Monetary policy produces too much uncertainty Fiscal policy has a larger multiplier effect
What is the Laffer curve. Graphically show how to increase the tax revenue.
from the news article (https://foreignpolicy.com/2020/09/16/coronavirus-covid-economic-impact-recession-south-korea-success/) Q1. South Korea announced stimulus package early on, in April. Use Aggregate demand and Supply diagram to show how the stimulus package must have worked? Q2. What is multiplier? How does it work? Do you think it worked in South Korean Case?
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Why might politicians prefer government spending increases instead of tax cuts to increase aggregate demand? tax multipliers are larger than government spending multipliers government spending multipliers are larger than tax multipliers politicians can direct government spending to their supporters politicians can direct tax cuts to their supporters government spending multipliers are larger than tax multipliers and politicians can direct government spending to their supporters