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.

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.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Role And Effects Of Government

Section18.10: Demand-side And Supply Side Views Of The Economy And Government Tools For The Changing Real Gdp

Problem 1ST

See similar textbooks

Related questions

Q: Which of the following is an example of an expenditure-increasing policy? a. a decrease in import…

A: Expenditure-Increasing Policy: An expenditure-increasing policy is designed to increase the…

Q: 1.4. The deflationary gap in an economy is calculated to be $700 billion. The marginal propensity to…

A: NOTE: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: An increase in household consumption may increase output and the price level. Explain how monetary…

A: The government of an economy plays a major role in the development of an economy. With the help of…

Q: Economic activity is subject to fluctuations (booms and slumps). Which of the following statements…

A: "Business cycle measures the fluctuations in the economy over time." "Automatic stabilisers…

Q: An economy's IS curve represents the following markets. Goods: slc = 4 MPC = 0.7 G = 10 T = 9…

A: Given MPC=0.7 G=10 T=9 I=10-90r r=0.047 Initially, the value of aggregate expenditure is Y0=44.9 The…

Q: In a two sector economy, aggregate demand is a function of _________ and __________

A: The concept of two sector Economy, pays attention to mainly two components of the society which are…

Q: The government announces a cut in the income tax rate. (a) Explain the multiplier effect by…

A: The government announces a cut in the income tax rate.

Q: When the economy gets into serious problems, the government has two policies that offer the…

A: Equilibrium occurs at the intersection of AD and AS.If the equilibrium level of GDP is less than the…

Q: The policies of the federal government influence the outcomes of the various activities in that…

A: Economic realities frequently influence government policy changes. Government policy, particularly…

Q: Considering the goods market of the following closed economy - the economy is not necessarily in…

A: In macroeconomics, aggregate demand orefers to the total demand for final goods and services in an…

Q: Suppose an economy is experiencing recession. From the list below, select two (2) policy tools that…

A: Recession is an general decline in the economic activities. It occurs when there is a decline in…

Q: Government is considering a policy change to stimulate the economy by encouraging private…

A: Government is considering a policy change to stimulate the economy by encouraging private…

Q: If the government wants to increase real GDP levels, it could

A: Through fiscal policy government can increase real gdp.

Q: This course is designed to provide an understanding of market economies and the fluctuations they…

A: Depending upon the situation in the economy the government adopts expansionary or contractionary…

Q: Should the government use monetary and fiscal policy in an effort to stabilize the economy? The…

A: In this case, we have to discuss the term expansionary fiscal policy. This policy actually used to…

Q: An economy's IS curve represents the following markets. Goods: slc = 4 MPC = 0.7 G = 10 T = 9…

A: C=a+b(Y-T) C=4+0.7(Y-9) T=9 MPC=0.7 G=10 I=10-90r r = 0.047

Q: Consider the economy of Canada. Its households spend 55% of increases in their income and saves 45…

A: The problem is to estimate the size of a tax cut necessary in the Canadian economy for the actual…

Q: Macroeconomic policies are the set of government rules and regulations to control or stimulate the…

A: The monetary and fiscal policies are part of the macroeconomic policy which the government sets.…

Q: Suppose that the government believes the economy is not producing goods and services at its optimal…

A: Here, it can be stated that the government is not producing at the optimal level. i.e., the economy…

Q: Which economic policies affect a government's budget and include the increase or decrease the money…

A: Economic policies are policies or course of action taken by the government in the field of…

Q: Consider an economy that uses exclusively labor and capital to produce. Suddenly, the government of…

A: Permanently increase in Government expenditure means government either produces public goods and…

Q: f you have the power to cut or increase taxes in your country with the aim of boosting aggregate…

A: Aggregate demand has the following components AD = C + I + G + NX Where, C - Consumption, I -…

Q: An economy has the following characteristics: Y = National income Taxes = T = 0.25Y C = Consumption…

A: Aggregate expenditure is the sum of consumption, investment, government and net exports. AE = C+ I…

Q: How do you recommend the government change GDP and taxes to stabilize the economy in each of the…

A: In an economy, government intervenes at the marketplace with its economic policies to deal with the…

Q: Evaluate the following statement: Even if the prices of a large number of goods and services in the…

A: Gross Domestic Product (GDP) refers to the value of goods and services that are produced inside a…

Q: Which of the following would not be classified as Expenditure Reducing Policies? Select one: a. None…

A: In an economy, expenditure reducing policies refers to the government actions to decrease aggregate…

Q: Which do you believe is the better macroeconomic policy to use for stabilizing (achieving potential…

A: A MP is a policy implemented by the Central Bank(CB) or the government of the company to control the…

Q: Which of the following is not a valid point in debating the merits of increasing government…

A: In the debate about the merits of increasing government expenditures or cutting taxes during a…

Q: Three major flows in an economy are; production, money and spending. Select one: True False

A: In economics, all the variables or economics concept are based on three major economic flows

Q: Identify the point or points for which the following is true: The economy cannot reach this point…

A: In Economics, the PPF is a curve that shows the varieties/bundles in the sums that can be delivered…

Q: Now consider an economy in which the government lowers its spending. In the long run, the result…

A: An increase in government spending is an expansionary fiscal policy measure whereas a decrease in…

Q: Do all these taxes and licenses reduce our disposable income? Why do we sacrifice and pay…

A: Disposable Income: The amount of money that an individual spends on consumption and savings after…

Question

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.

Definition Definition Policy implemented by the central bank of a country (such as the Federal Reserve in the United States) to achieve certain macroeconomic objectives. Monetary policy is a supply-side macroeconomic policy that supervises the growth rate and money supply in the economy.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Investment

VIEW

Step 2: Explain the correct option

VIEW

Step 3: Explain why other options are incorrect

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Which of the following would not be classified as Expenditure Reducing Policies? Select one: a. None of the answers is correct b. All the answers are correct c. Using Fiscal and monetary policies d. Policies to improve competitiveness e. Devaluing the exchange rate
Which of the following is an example of an expenditure-increasing policy? a. a decrease in import quotas b. an increase in the money supply c. an increase in import tariffs d. higher income taxes
An economy's IS curve represents the following markets. Goods: slc = 4 MPC = 0.7 G = 10 T = 9 Finance: I = 10 - 90r and r = 0.047 Currently, expenditure Y0 = 44.9. However the government decides to embark on a fiscal expansion, setting G to G1=12. The expenditure reacts to the new government spending G. Before the interest rate or anything else has time to react, the new expenditure is 51.567 Now we're adding an LM curve to the economy from above. The money market is given by M/P = 0.02 / (r - Y/10,300)^2 M = 22 P = 2 1. We continue with the fiscal expansion scenario, with G0=10 and G1=12. Draw a new graph that includes the LM curve and both the IS curves. Show how at the same old unchanged r = 0.047 the volume of transactions supported by the money market is lower than the expenditure afforded by the goods and financial markets. That is, map r=0.047 into the expenditure, Y1, and into the original volume of transactions, Y0. 2. Now let's let the three markets interact and choose the…
Government is considering a policy change to stimulate the economy by encouraging private consumption by reducing sales taxes. The loss of tax revenue will be made up by increasing taxes on corporate profits and excess savings. What are the short- and long-term effects of such a change?
Suppose that the government believes the economy is not producing goods and services at its optimal level. In an attempt to stimulate the economy, the government increases the quantity of money in the economy by printing more money. This monetary policy the economy's demand for goods and services, leading to product prices. In the short run, the change in prices induces firms to produce goods and services. This, in turn, leads to a level of unemployment. In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to unemployment.
The policies of the federal government influence the outcomes of the various activities in that economy. When government policies change or unplanned events occur, the resulting economic events or activity will usually change. Listed below is a policy or event that affect the performance of the economy: The federal government, in an effort to stimulate the economy, decreases taxes on all individuals except those earning over $250,000 per year. For the items above, describe what would be the likely outcome in the economy. Use the appropriate tools of analysis, such as aggregate demand and aggregate supply where appropriate, to justify and explain your answer.
An economy's IS curve represents the following markets. Goods: slc = 4 MPC = 0.7 G = 10 T = 9 Finance: I = 10 - 90r and r = 0.047 Currently, expenditure Y0 = 44.9. However the government decides to embark on a fiscal expansion, setting G to G1=12. 1. The expenditure reacts to the new government spending G. Before the interest rate or anything else has time to react, find the new expenditure. 2. graph the change in the IS curve. Label axes and curves, project the new and the old values on respective axes. 3. How will the IS curve be affected? a. slide down along the IS curve b. slide up along the IS curve c. shift of the IS curve right d. shift of the IS curve left
Indicate whether the following policy statement is Fiscal or Monetary or Neither Increase income tax deductions for students Indicate whether the following policy statement is Fiscal or Monetary or Neither Decrease grants to universities Indicate whether the following policy statement is Fiscal or Monetary or Neither. Raising the Bank Rate
Consider the economy of Canada. Its households spend 55% of increases in their income and saves 45 %. There are no taxes and no foreign trade. Currently, Canada has a recessionary gap, the governments aim is to get actual output to increase by 220 billion dollars. How much of a tax cut do they need to have to achieve the overall increase in output of 220 billion dollars?
Now consider an economy in which the government lowers its spending. In the long run, the result would be _____________ in the price level and _____________ in real output. an increase; an increase a decrease; no change a decrease; a decrease None of the listed options is correct. no change; a decrease
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)).
Consider an economy that uses exclusively labor and capital to produce.Suddenly, the government of the economy plans to permanently increase the level ofgovernment purchases. Please use words and figures to illustrate your answers.(1) Suppose the economy is a closed one. How does the long-run GDP of the economychange because of the increased government purchases? (2) Will your answer to (1) be changed if the economy is an open one? Explain youranswers briefly.(3) Suppose the economy is a closed one. Will the increased government purchaseschange the equilibrium interest rate?