QUESTION 20 for. A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve to the right will: O a result in no significant change in real or nominal GDP or employment once the change is anticipated. O b. shift the AD curve in the opposite direction intended once people's expectations have been accounted O c. result in an increase in the demand for money once people's expectations have been accounted for Od result in a change in real output in the long run if the policy is unanticipated. O e result in a change in real output in the intended direction if the policy is anticipated.

QUESTION 20 for. A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve to the right will: O a result in no significant change in real or nominal GDP or employment once the change is anticipated. O b. shift the AD curve in the opposite direction intended once people's expectations have been accounted O c. result in an increase in the demand for money once people's expectations have been accounted for Od result in a change in real output in the long run if the policy is unanticipated. O e result in a change in real output in the intended direction if the policy is anticipated.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Simon was hired by the City Council of Economic Development (CCED) as an economic consultant. The chairperson of the CCED told Simon that she believed the current unemployment rate was too high. The unemployment rate can be reduced if the aggregate output increases. She wanted to know what policy to pursue to increase aggregate output by $400 billion. The best estimate she has for the MPC is 0.8. Which of the following policies should Simon recommend? O increase government purchases by $100 billion. O reduce the budget deficit by $400 billion. O reduce taxes by $100 billion. O reduce taxes by $100 billion and to increase government purchases by $50 billion.
Continuing the situation in the above question (i.e. suppose the economy begins in a long-run equlibrium at potential output when the government decides to alter spe and/or taxes to make the budget deficit smaller). What would be the long-run impact of this action? 000 unemployment and investment spending are unchanged unemployment is higher and investment spending is unchanged Unemployment is unchanged, but there is more investment spending unemployment is higher and there is less investment spending
b. If no policy is used to restore full employment, the interest rate and the price level will ? fall, raise or stay the same. choose one Since the long-run interest rate will be? lower or stay the same choose one investment will be? lower or larger. choose one If fiscal policy is used, the IS or LM curve will shift to the left or right. choose one The price level will fall or not change choose one but the long-run interest rate will either increase or decrease. choose one This will either reduce or increase (which one) the amount of private investment at the new equilibrium, at either a or b or c. choose one
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In a binding situation,an increase in net taxes Select one: O a. causes the ADcurve to become horizontal. O b. does not shift the ADcurve. O c shifts the AD curve to the left. O d. shifts the ADcurve to the right.
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What do you expect will happen to the price level and real GDP in the short run when the bank of Canada buys domestic government bonds given a positively sloped SRAS curve? Select one: O a. Both the price level and real GDP will cross out increase. O b. Both the price level and real GDP will decrease. cross out O c. The price level will increase while real GDP cross out will decrease. O d. The price level will decrease while real GDP cross out will increase. O e. There is no change either to the price level or cross out the real GDP
Consider the components of AD for the following economy: (1) consumption = $600 billion; (2) investment = $60 billion; (3) government purchases = $120 billion; and (4) net export = $25 billion. If the full-employment level of GDP for this economy is $705 billion, then what combination of actions would be most consistent with the goal of achieving price level stability? Increase government spending and decrease taxes O Decrease government spending and increase taxes Increase government spending and taxes O Decrease government spending and taxes
In the AS/AD Model, a decrease in the financial friction will Select one: O a. Shift the aggregate demand curve to the right. Ob. O b. Shift the aggregate supply curve to the left. Shift the aggregate supply curve to the right. O c. O d. Shift the aggregate demand curve to the left.
According to the basic AS-AD model with a horizontal AS curve, high inflation and recession can occur in the short-run at the same time when there is: O b. an adverse supply shock with a decrease in aggregate demand. O C. a favorable supply shock with a decrease in aggregate demand. O d. a favorable supply shock without a change in aggregate demand. an adverse supply shock without a change in aggregate demand.