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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Which of the following is true? a. All economists agree that the tax multiplier is smaller than the government spending multiplier. b. In the standard Keynesian textbook analysis, the tax multiplier is greater than the government spending multiplier. c. There is disagreement among economists regarding the size of the tax multiplier relative to the size of the government spending multiplier. d. All economists agree that the tax multiplier is greater than the government spending multiplier.
3.6
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) If the spending multiplier is 2.5 and the economy is in a $500 billion contractionary gap, how much should I increase government purchases to eliminate the gap? d) Continuing with c, if the MPC is 0.8, how much would I need to increase transfer payments to eliminate the $500 billion contractionary gap? e) True or False and explain: Households always react to tax changes in a predictable manner. Module 6: Deficits and the Debt. a) Distinguish between deficit and debt. b) Explain what crowding out is and why it reduces the impact of fiscal stimulus. c) True or false and explain: The national debt represents a threat of bankruptcy. (For d and e) Suppose the interest on the debt was $600 billion. If interest is paid domestically, 90% will be spent domestically (the remainder is…
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