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True or False: Economists today believe monetary and fiscal policy can help reduce the magnitude of fluctuations in real
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- An increase in household consumption may increase output and the price level. Explain how monetary and fiscal policies can be used to keep the stability of the price level. Use relevant graphs to support your answer.Three major flows in an economy are; production, money and spending. Select one: True FalseWhen the economy is weak, fear of losing jobs cause consumers to cut back on spending. True False
- Economic activity is subject to fluctuations (booms and slumps). Which of the following statements is correct for the US economy, considering the entire period from 1870-2015? Select one: a. Economic fluctuations have been reduced by automatic stabilizers as the size of government has increased b. The main cause of economic fluctuations over this period has been the size of the agricultural sector and the effects of weather. c. Economic fluctuations have increased due to the speed with which money moves around the world in recent years d. Bank failures and financial crises were the main causes of economic fluctuations.Which of the following occurs as investment becomes more responsive to changes in the interest rate? Select one: a) . Monetary policy becomes more effective at changing real gross domestic product. b)There is no change in the effectiveness of either monetary or fiscal policy. c) Fiscal policy becomes more effective at changing real gross domestic product. d) Monetary policy becomes more effective at changing interest rates.Why might “belt-tightening” by consumers in a recession be unwelcome?
- Assume the economy has entered a recession. Identify two fiscal and two monetary policy actions that could be used to alleviate the recession and explain how each policy would improve the economy.Using the aggregate demand and supply model shows how a government can manage aggregate demand.The consequences of climate change on the economy is a popular topic in the media. Suppose that a series of wildfires destroys crops in the western states at the same time a hurricane destroys refineries on the Gulf Coast. a) Using aggregate demand and supply analysis, explain how output and the inflation rate would be affected in the short and long runs. b) Show your answer graphically. Note: don't use chat gpt
- Consider an economy currently in recession. Which is NOT a policy move that could assist the economy, as discussed in class? Raising the money supply Raising government spending Lowering bank reserves Lowering interest ratesWhat happens when firms and workers underestimate future prices in the economy? Explain the answer while focusing on what would happen to actual output as opposed to the expected potential output.Which do you believe is the better macroeconomic policy to use for stabilizing (achieving potential GDP and controlling inflation) the economy - Monetary or Fiscal? SUPPORT your stance (for example, if you believe fiscal policy is better than monetary policy, explain how fiscal policy (pros) achieves these objectives better than monetary policy (cons)).
