The diagram below shows a country's aggregate demand and supply schedules, with equilibrium at point Y. Price Level С CD Y AD A Expansionary supply side policy B Expansionary monetary policy Contractionary monetary policy Expansionary fiscal policy The central bank has set interest rates at 0.1% for an extended period of time, and the economy remains in equilibrium at point Y. In such circumstances, what is the most likely policy intervention that a government might use? LRAS YF Real National Output

The diagram below shows a country's aggregate demand and supply schedules, with equilibrium at point Y. Price Level С CD Y AD A Expansionary supply side policy B Expansionary monetary policy Contractionary monetary policy Expansionary fiscal policy The central bank has set interest rates at 0.1% for an extended period of time, and the economy remains in equilibrium at point Y. In such circumstances, what is the most likely policy intervention that a government might use? LRAS YF Real National Output

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Scenario FRQ In 2019 the federal government decreased interest rates for banks three times. Shortly after, POTUS tweeted the following Would be sooo great if the FED would further lower interest rates and quantitative ease. The Dollar is very strong against other currencies and there is almost no inflation. This is the time to do it. Exports would zoom! December 17, 2019 A. Define the type of economic policy inferred by the scenario and describe how it impacts the economy. B. Describe why POTUS has no power to control the implied power inferred to by the scenario above. C. Describe how a change in political party leadership could effect the outlined scenario above.
41) Which of the following is a tool for achieving macroeconomic objectives? A) Fiscal policy B) Monetary policy C) Incomes policy D) All of the above 42) Macroeconomics is useful: A) only to governments B) only to business firms seeking to maximize their profits C) only to households seeking employment D) to all economic decision-making units 43) Consider a circular flow model with households, firms, and government. Which of the following is true? A) Households sell labour services and other resources to firms B) Households purchase resources from firms and convert them into goods and services C) The government does not purchase anything from households D) Households receive income from firms but not from the government 44) Payments such as employment insurance and welfare are called: A) employment income B) transfer payments C) compensation income D) business income 45) When households purchase government bonds, they: A) lend to the…
The great inflation of the 70's can be partially explained by the fact that the policymaker misinterpreted the output gap and O O tightened fiscal policy tightened monetary policy loosened fiscal policy loosened monetary policy
Suppose the economy begins at potential output when the federal government decreases taxes. A. Graph the impact of this action using AS-AD. Note the original equilibrium as point "A" and the short-run equilibrium after the policy action as point "B". B. Graph the transition from the short run to the long run.
12. Of the following reasons why fine-tuning the economy is not likely to be successful, which one involves the difficulty of crafting and assembling a political consensus around a set of measures to counteract the economy's shift in direction? a) Recognition lag b) Policy lag c) Implementation lag d) Impact lag e) None of the above
The graph shows an economy's aggregate demand and aggregate supply curves and potential GDP. Does this economy have an inflationary gap or a recessionary gap? How does this economy return to full employment? This economy has _______ gap. It returns to full employment as _______. A. an inflationary; the money wage rate rises B. a recessionary; potential GDP increases C. a recessionary; the money wage rate falls D. an inflationary; aggregate demand decreases
The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. O The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. O Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. O Businesses make investment plans many months in advance. O The current tax system acts as an automatic stabilizer. Which of the following are examples of automatic stabilizers? Check all that apply. O Corporate income taxes O Unemployment insurance benefits O The federal funds rate
8a. Assume that an economy is at equilibrium at its potential GDP at $10 trillion and aprice level of 100. What would be the short-run impact of a significant fall in consumer confidence about the future? Provide an AD/AS model to support your answer. b. What policy would you recommend to the chairperson of the Federal Reserve? Be specific. Show the effect of this policy on your graph part a. c. What are the major goals of the Fed's monetary policy?
Use AD and AS curves to explain the effects on the equilibrium price level and equilibrium level of output in the short run.(a) An expansionary fiscal policy with the economy operating near full capacity. (b) A contractionary monetary policy during a period of high unemployment and excess industrial capacity. (c) A strong hurricane destroys energy plants which cause energy prices to increase, assuming that the Fed attempts to keep interest rates constant by accommodating inflation. (d) The federal government pursues a contractionary fiscal policy while the Fed acts to keep output from falling.
ון רבSuip Reset the graph and click on the blue square to apply a negative supply shock the the economy. Then adjust the movable point to view the effects of potential policy responses to the negative supply shock. Use what you observe to answer the questions that follow. a. In response to the effects of a negative supply shock, policymakers decide to decrease aggregate demand. What are the effects of this choice? O an increase in aggregate output, and an increase in the aggregate price level an decrease in aggregate output, and an decrease in the aggregate price level an increase in aggregate output, and an decrease in the aggregate price level an decrease in aggregate output, and an increase in the aggregate price level b. What are the overall tradeoffs with regard to this choice? Policymakers have chosen to fight inflation by increasing AD, but this further reduces aggregate output and makes the recession worse. Policymakers have chosen to fight inflation by decreasing AD, but this…
O a) A to B CF Ans Ski b) B to A O c) C to D d) D to C e) A to E O f) C to E Refer to the diagram. If the economy is in an inflationary gap, and the government uses restrictive fiscal or monetary policy to bring down prices, there will be a movement from point to point -- LRPC Prtential veal GoP SRPC
2. The graph below shows the AD-AS model in short-run equilibrium at price level Po and level of real GDP at Yo. Label the following: AD, SRAS, LRAS, Po and Yo. P Y A. Is this SR equilibrium a recessionary gap or an inflationary gap? Why is the undesirable? B. Assume Congress and the President decide to act. How would you suggest they alter each of the following (1,↓↓, or no change)? - Taxes - Transfer Payments -Government Spending C. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. D. As the economy moves from Yo to Yp, what happens to the following (1,↓, or no change)? - Real GDP - the unemployment rate - The price level - the rate of inflation