Using the AD (Aggregate Demand) and AS (Aggregate Supply) curves, explain the effectiveness of the government's economic policies (fiscal and monetary) in the long and short term.
Q: Analyze fiscal policy in order the generate macroeconomic stability.
A: The policy that depicts making use of a collection of revenue by government and expenditure in order…
Q: The position of the AS-curve depends on Multiple Choice fiscal policy monetary policy consumer…
A: In an economy, aggregate supply curve is the survey that explains the overall production of output…
Q: please answer the following question: 1. Expansionary policies are government policies that: A)…
A: "In macro-economics, there are two kinds of policies i.e. fiscal policy and monetary policy and both…
Q: Which of the following statements about Fiscal Policy is INCORRECT? choose the correct answer (a) In…
A: Fiscal policy is independently implemented or used by the government to make changes in the market…
Q: what type(s) of stimulus policy can account for an increase in interest rates and an increase in…
A: Economic stimulus is behavior by the state which induces private industry economic investment by…
Q: Which of the following would be a fiscal policy prescription for ending inflation? A) Raise taxes…
A: Inflation is the incident when the general price-level(P) of the economy rises over time. The…
Q: Spending caps and sequestration have limited previous administration; what opportunities are…
A: The following problem in relation to USA government has been answered as follows:
Q: Refer to the setup of 2 questions ago. An increase in government spending would Group of answer…
A: Government spending is the amount of money spent by the government on purchasing products and…
Q: True/False Unemployment benefits are an example of fiscal policy.
A: An unemployment benefit refers to a benefit provided to an unemployed person by the state in terms…
Q: Fiscal Policy refers to the idea that aggregate demand is affected by changes in Question 58…
A: Fiscal policy is a tool of government which they use to control the economy stability.
Q: Label each of the following scenarios in which there are problems enacting and applying fiscal…
A: Fiscal policy can be used by the government in order to stabilize the economy. Primarily in fiscal…
Q: Fiscal policy refers to the idea that aggregate demand is affected by changes in a. the money…
A: Government of a country has power to influence its economy by adopting different tools and policies.…
Q: Match- Identify each item as Expansionary Contractionary Policy Used to stabilize high price levels…
A: Contractionary policy is used to reduce inflation, GDP, employment, price level and used in the…
Q: If businesses and consumers become pessimistic, the government can attempt to reduce the impact on…
A: The performance and expansion of the economy are driven by aggregate demand or spending in Keynesian…
Q: Which of the following is an appropriate fiscal policy response if the economy is in a state of…
A: The fiscal policy is the policy of the government in the economy to control the spending levels of…
Q: Supply-side policies are government policies a)designed to influence the size of the general…
A: Supply Side Theory is a concept of growing the supply of goods and services with ambition to…
Q: Which statement below is true of ONLY fiscal policy? Uses government expenditures to create demand…
A: The aggregate demand refers to the total amount of all the goods, and services which are demanded in…
Q: Higher corporate taxes, higher capital gains taxes, and higher marginal tax rates shift aggregate…
A: A charge that is being imposed by the government on the income of individuals, goods or services or…
Q: Refer to the information provided in Figure below to answer the question that follow. AS Price…
A: Answer: Correct option: c (AD3 to AD4) Explanation: If the demand curve shifts from AD3 to AD4 then…
Q: Using the aggregate demand and supply model shows how a government can manage aggregate demand.
A: Aggregate demand is the sum of demand for all commodities and services in an economy. Government can…
Q: Which of the following would be classified as fiscal policy? The federal government passes tax cuts…
A: Answer - Need to find- Which of the following would be classified as fiscal policy Given in the…
Q: Government stabilization policy a. can stimulate aggregate demand, but only in the long run. b.…
A: The government stabilization policy consists of two types of policy monetary and fiscal policy.…
Q: How fiscal policy influences aggregate demand?
A: Aggregate demand refers to the overall demand for commodities and services in an economy during a…
Q: AS AD, AD AD, Real GDP Refer to the above diagram. An expansionary fiscal policy can best be…
A: In an expansionary fiscal, the government increases its spending or decrease in tax to increase the…
Q: Use the AS/AD diagram to show( graphically only) the short term and long term effects of restrictive…
A: Restrictive fiscal policy leads to the fall in the AD and recessionary pressure rises up in the…
Q: If aggregate demand shifts left and the President and Congress want to use fiscal policy to reverse…
A: Aggregate demand measures the total demand of goods and services in an economy. The aggregate demand…
Q: Which of the following statements is true? Unlike monetary policy, fiscal policy is not subject to…
A: Policy: It refers to the plans and programs made for the growth of the economy. The policies are…
Q: From the perspective of someone using aggregate-demand and aggregate supply analysis, what is the…
A: Full employment is the situation where all the resources are fully utilized.
Q: In an effort to boost output, the government passes a large fiscal stimulus that raises government…
A: The shape of AS curve changes according to the time. So in the very short run, it is parallel to the…
Q: If households and firms are pessimistic about the economy and very reluctant to increase investment…
A: When the zero interest rate policy does not make economy to move out of recession, the expansionary…
Q: Potential GDP corresponds to the concept of A aggregate supply. real GDP. C real GDP per capita.…
A: PLEASE FIND THE ANSWER BELOW.
Q: Which of the following is a fiscal policy that would increase aggregate demand in the short-run? An…
A: Consider an economy that is experiencing a recession to see how the government can utilise fiscal…
Q: In each of the following cases, either a recessionary or an inflationary gap exists. Assume that the…
A: Real GDP equals $100 billion, potential output equals $160 billion, and the marginal propensity to…
Q: When the economy is in a recessionary mode, what will likely be the actions by government using…
A: In recessionary mode, the government pursue the expansionary fiscal policy which has two tools which…
Q: U.S. Congress Gives Final Approval to $787 Billion Stimulus Feb. 13 (Bloomberg)-The U.S. Congress…
A: The given value of MPC is 0.90. and; In first year, stimulate government spending is $185 billion.…
Q: Aggregate demand shifts right when the government
A: Aggregate demand curve shift right or left according to the changes in consumption, investment,…
Q: Supply-siders ignore the effects of tax cuts on a, aggregate supply. b. aggregate demand. c,…
A: Supply side economics is defined as the macroeconomic theory which states that economic growth can…
Q: The government will have _____ flexibility in implementing countercyclical fiscal policy when the…
A: Answer: (1). b (More; small) Explanation: The government will have more flexibility when the…
Q: Active policy making refers to nondiscretionary policy making. relying on policies that act as…
A: Economics is a branch of social science that describes and analyzes the behaviors and decisions…
Q: Why tax cuts can increase both aggregate demand and aggregate supply?
A: In an economy, taxation refers to one of the government tools to influence a market situation and to…
Q: To combat inflation, the federal government could apply which fiscal policy? decrease government…
A: Fiscal policy refers to changes in government spending and taxes.Monetary policy refers to changes…
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- 11. How do lower taxes affect aggregate demand? A) They increase disposable income, consumption, and aggregate demand. B) They reduce disposable income, consumption, and aggregate demand. C) They decrease corporate investment and aggregate demand. D) They increase aggregate supply and thus increase aggregate demand as well 12. Full-employment GDP is also known as A) realized GDP. B) potential GDP. C) politico-economic GDP. D) balanced-budget GDP.Aggregate Supply and Aggregate Demand show the relationship between economic output (GDP) and price levels in the macro-economy at a given point in time. Define the terms ‘Aggregate Demand’ and ‘Aggregate Supply.’ State TWO (2) monetary and TWO (2) fiscal policies that government can adopt, to effect change in Aggregate Demand.Suppose there is a deflationary gap in the economy and the government plans to introduce expansionary fiscal policy to move expenditure closer to full employment level of output. They will increase spending on infrastructure projects such as roads, ports, bridges, dams etc. At the same time households and firms have become pessimistic about the future and cut back spending to save more for difficult days ahead. Answer the questions below based on the government's planned policy and consumers' and firms' pessimism. What happens to the Marginal Propensity to Consume in the economy ? Choose. What happens to the Spending Multiplier? Choose. Would the effect of expansionary fiscal policy on total demand be more effective or less More effective effective? Decreases Increase Less effective
- 1. Give three examples of governments that are adept in the use of fiscal policy. 2. Give three examples of governments whose use of fiscal policy leaves a lot to be desired? Explain your thinking. 3. What is potential GDP? What role does it play in fiscal and monetary policies?(a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real GDP supplied. How will this affect the aggregate supply or aggregate demand curve? What if the potential GDP increases? Which aggregate curve is affected and how? (b) Real GDP Consumption Planned Investment Government Purchases Net Exports $1,000 $1,000 $100 $150 -$50 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4,000 3,700 100 150 -50 From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations. a. What is the equilibrium level of real GDP? b. What is the Marginal Propensity to Consume? c. What is the multiplier value in this economy? d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy? e. If the economy is not at full employment, by how much should government spending…1. If the government is required to balance the budget and the economy falls into a recession, which of the actions is a feasible policy response? - invest in infrastructure - cut spending equal to the reduction in tax revenue - cut taxes to encourage consumer spending - increase government spending to stimulate the economy 2. What is a likely consequence of this policy? - The negative consequences of the recession are magnified. - Consumer spending increases due to their ability to keep more of their after-tax income. - Unemployment falls due to the economic stimulus. - There is hyperinflation due to an increase in aggregate demand.
- 4. Consider the following demand and supply schedules of loanable funds. All figures are in billion dollars. Assume zero budget deficits and a closed economy. a. Interest Rate 12% 10% 8% 6% 4% 2% Quantity of Funds Demanded $200 $300 $400 $500 $600 $700 Determine the following equilibrium outcomes: (1) The interest rate. (ii) Private savings. (iii) Government (public) savings. (iv) Private business investment. Quantity of Funds Supplied $1000 $900 $800 $700 $600 $5004. Fiscal policy affects aggregate demand because: government spending is a category of aggregate demand. taxes affect corporate spending and so investment. taxes affect disposable income and so consumption. all of the above.(22) Assume that the economy begins in long-run equilibrium and that the federal reserve decides to use open market operations to sell bonds. In the short run, what happens to the level of GDP? Group of answer choices (A) It goes down. (B) It goes up. (C) It stays the same.
- 2. Considering the recent pandemic situation, Consumers fear a recession, they start reducing consumption. How can the government counteract (what policy government can consider)? What are the shortcomings of such a policy (fiscal)? Explain one of them. Use a graph to illustrate your arguments.2. Consider an economy where aggregate demand AD consists of aggregate con- 1000 and government = sumption C 10+ 0.8Y, aggregate investment I spending G = 800. (a) = (c) (d) What is aggregate demand if aggregate income/output is 10,000? Why is the economy not in equilibrium in that state? Calculate the goods market equilibrium for this economy. (b) Assume that the government increases spending by 20%. Calculate the new goods market equilibrium. What is the multiplier for the change in government spending? Assume now that the country starts trading globally and has Exports and Imports. Assume that imports are given by Im = n Y, with n being the marginal propensity to import. (e) Explain why - with exports and imports - a increase in government spending (e.g., 20%) results in a smaller change in aggregate demand/income in equilibrium than without exports and imports. (You do not have to calculate the new equilibrium.)2. The government decreases current taxes, while holding government spending in the present and the future constant. (a) Using diagrams, determine the equilibrium effects on consumption, investment, the real interest rate, aggregate output, employment, and the real wage. What is the multiplier, and how does it differ from the government expenditure multiplier? (b) Now suppose that there are credit market imperfections in the market for consumer credit, for example due to asymmetric information in the credit market. Repeat part (a) and explain any differences in your answers in parts (a) and (b). Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.