Which of the following describes Keynes' position in fighting recessions? O A. Keynes emphasized fiscal policy, which affects demand directly through investment and interest rates. O B. Keynes emphasized monetary policy, which affects demand indirectly through taxes and government spending. O C. Keynes emphasized monetary policy, which affects demand indirectly through investment and interest rates. O D. Keynes emphasized fiscal policy, which affects demand directly through taxes and government spending. In the short run, the Phillips curve shows V relationship between unemployment and inflation. As the Phillips curve evolved, Friedman proved that in the long run, higher levels of inflation V reduce unemployment. will not will

Which of the following describes Keynes' position in fighting recessions? O A. Keynes emphasized fiscal policy, which affects demand directly through investment and interest rates. O B. Keynes emphasized monetary policy, which affects demand indirectly through taxes and government spending. O C. Keynes emphasized monetary policy, which affects demand indirectly through investment and interest rates. O D. Keynes emphasized fiscal policy, which affects demand directly through taxes and government spending. In the short run, the Phillips curve shows V relationship between unemployment and inflation. As the Phillips curve evolved, Friedman proved that in the long run, higher levels of inflation V reduce unemployment. will not will

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.
Suppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that a long strike by coal miners reduces the coal supply and increases the price of coal. Show the effects on your graph and label the new equilibrium point "2." Lastly, suppose our government wants the economy to return to full-employment as quickly as possible. Should the government intervene? If so, show the impact of successful fiscal policy on your graph. Label this new equilibrium point "3."
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
If wages adjust fully to price increases in the long run, fiscal policy will Select one: Oa have no affect on either output or the price level. O b. have no affect on output. Oc have no affect on the price level. O d. affect both output and the price level.
Which statement is most likely consistent with the classical view? O The Congress should set interest rate targets. The monetary policy is more effective than Keynesian theory. Fiscal policy works better than monetary policy. O Fiscal and monetary policies cause more economic instability than stability.
Suppose the current rate of inflation is about 14% and there is an inflationary gap of $150 billion in the economy. Which of the following policies would be most appropriate to reduce inflation if the marginal propensity to save (MPS) is equal to 0.05. A. Reduce government spending by $30 billion B. Reduce government spending by $50 billion. O C. Reduce government spending by $7.5 billion D. Reduce government spending by $150 billion OE. Reduce government spending by $25 billion
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In the dynamic model of AD-AS in the figure to the right, if the economy is at point A in year 1 and is expected to go to point B in year 2, Congress and the president would most likely pursue OA expansionary fiscal policy. OB. expansionary automatic stabilizers. OC. contractionary fiscal policy. OD. contractionary monetary policy. OE. expansionary monetary policy. Click to select your answer MacBook Air Price Level 104 100 101 LRAS, LRAS₂ A B 11113AD Real GOP SRAS, SRAS₂ AD₂
Which statement is CORRECT? A) Automatic stabilizers indicate deliberate action by policy makers. O B) Discretionary fiscal policy shows automatic adjustments without any specific effort by policy makers. C) Discretionary fiscal policy indicates deliberate action by policy makers. Automatic stabilizers are risky tó use and sometimes can get the economy D) destabilized.
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The graph below depicts an economy where an increase in aggregate demand has caused Inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring Inflation under control. Price Level 160 150 140 130 120 110 100 90 80 70 60 50 Fiscal Policy LRAS AS Real GDP (billions of dollars) AD₁ AD 40 80 160 240 320 400 480 560 640 720 800 Instructions: Round your answers to 2 decimal places. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.75, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose Instead that the MPC is 0.5. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.