Read the following excerpts. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. Draw and label the change that would occur on the AD/AS graph as a result of the policy action described in each. Identify what will happen as a result of the policy to the price level, employment, and real GDP. Excerpt from President Jimmy Carter’s televised speech delivered October 24, 1978 “Good evening. I want to have a frank talk with you tonight about our most serious domestic problem. That problem is inflation. Inflation can threaten all the economic gains we’ve made, and it can stand in the way of what we want to achieve in the future. This has been a long-time threat. For the last 10 years, the annual inflation rate in the United States has averaged 6-1/2 percent. And during the three years before my inauguration, it had increased to an average of 8 percent. If inflation gets worse, several things will happen. Your purchasing power will continue to decline, and most of the burden will fall on those who can least afford it. Our national prosperity will suffer. The value of our dollar will continue to fall in world trade. …Inflation is obviously a serious problem. What is the solution? …I will concentrate my efforts within the government. We know that government is not the only cause of inflation. But it is one of the causes, and government does set an example. Therefore, it must take the lead in fiscal restraint. …We are going to hold down government spending, reduce the budget deficit, and eliminate government waste. We will slash federal hiring and cut the federal work force. We will eliminate needless regulations. …And we will oppose any further reduction in federal income taxes until we have convincing prospects that inflation will be controlled.” Identify whether the policy action is fiscal or monetary. Identify whether the policy action is expansionary or contractionary. Draw and label the change that would occur on the AD/AS graph as a result of the policy action described in each. Identify what will happen as a result of the policy to the price level, employment, and real GDP.
Read the following excerpts. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. Draw and label the change that would occur on the AD/AS graph as a result of the policy action described in each. Identify what will happen as a result of the policy to the price level, employment, and real GDP.
Excerpt from President Jimmy Carter’s televised speech delivered October 24, 1978
“Good evening. I want to have a frank talk with you tonight about our most serious domestic problem. That problem is inflation. Inflation can threaten all the economic gains we’ve made, and it can stand in the way of what we want to achieve in the future.
This has been a long-time threat. For the last 10 years, the annual inflation rate in the United States has averaged 6-1/2 percent. And during the three years before my inauguration, it had increased to an average of 8 percent.
If inflation gets worse, several things will happen. Your purchasing power will continue to decline, and most of the burden will fall on those who can least afford it. Our national prosperity will suffer. The value of our dollar will continue to fall in world trade.
…Inflation is obviously a serious problem. What is the solution?
…I will concentrate my efforts within the government. We know that government is not the only cause of inflation. But it is one of the causes, and government does set an example. Therefore, it must take the lead in fiscal restraint.
…We are going to hold down government spending, reduce the budget deficit, and eliminate government waste.
We will slash federal hiring and cut the federal work force.
We will eliminate needless regulations.
…And we will oppose any further reduction in federal income taxes until we have convincing prospects that inflation will be controlled.”
- Identify whether the policy action is fiscal or monetary.
- Identify whether the policy action is expansionary or contractionary.
- Draw and label the change that would occur on the AD/AS graph as a result of the policy action described in each.
- Identify what will happen as a result of the policy to the price level, employment, and real GDP.
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