Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 11, Problem 5CQ
To determine
Changes in fiscal policy and the problems related with timing.
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How would a Keynesian Economist use Fiscal Policy to fight a Recession? Please do not
write about Monetary Policy here, only Fiscal Policy.
Do you think policy makers should attempt to stabilize the economy ? Why ?
Can governments use expansionary fiscal
policy or expansionary monetary to effectively
fight recessions? Why or Why Not?
Chapter 11 Solutions
Economics: Private and Public Choice
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- From a Keynesian point of view, which is more likely to cause a recession: aggregate demand or aggregate supply, and why?arrow_forwardExplain the difference between fiscal policy and monetary policy. What are some of the reasons these macroeconomic policies are used? Elaborate on reasons these policies are used.arrow_forwardIdentify the various policy choices available when an economy experiences an inflationary or recessionary gap and discuss some of the pros and cons that make these choices controversial.arrow_forward
- Why might “belt-tightening” by consumers in a recession be unwelcome?arrow_forwardKeynesian economics defends budget balance. However, according to economists, budget balance may exacerbate the effects of the business cycle. Isn't it also a Keynesian view to use discretionary policy to smoothen the business cycles? Aren't those two views contradictory?arrow_forwardFrom 2008, how might monetary policy (as reflected in the OCR) have affected the degree of crowding out resulting from fiscal policy (as reflected in government expenditure)?arrow_forward
- A stimulative monetary or fiscal action should increase aggregate demand. What factors may limit the actual increase in aggregate demand?arrow_forwardShould Monetary and Fiscal Policymakers Try to Stabilize the Economy? Explain.arrow_forwardIn theory, fiscal policy can be as effective in stabilizing the economy as is monetary policy. What are the practical reasons that modern nations typically rely on central banks and monetary policy for stabilizing output, employment, and inflation?arrow_forward
- *Does monetary or fiscal policy have a longer time lag? Why?arrow_forwardUsing the concept in Keynesian economics, which one of the following may not be an effective fiscal policy when there is inflation? a) increasing aggregate demand b) increasing corporate taxes. c) increasing personal taxes. d) decreasing government purchases.arrow_forwardWhat is the difference between fiscal and monetary policy? What fiscal and monetary steps can the government and the central bank undertake during times of recession to help the economy? What are the pros and cons of fiscal and monetary policy?arrow_forward
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