Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Question
Chapter 12, Problem 1CQ
To determine
Fiscal policy measures in the current economy.
Expert Solution & Answer
Explanation of Solution
For discretionary fiscal policy, there will be a problem of appropriate timing which may fail to provide desired result. Hence, the automatic stabilizers like
When the economy is in recession, the automatic stabilizers increases the government expenditure (spending) and reduces taxes. Alternatively, when there is an economic boom, these stabilizers reduce the government expenditure (spending) and increase the taxes.
These automatic stabilizers enlarge the budget deficit of the government. This increases the aggregate
Economics Concept Introduction
Discretionary fiscal policy: Discretionary fiscal policy refers to the change in government spending and taxes in order to achieve economic goals.
Automatic stabilizers: Automatic stabilizers are changes in fiscal policy that varies the aggregate demand during fluctuations in business cycle without the need for explicit action by policymakers.
Countercyclical fiscal policy: counter cyclical fiscal policy is an automatic action which operates in opposite direction from the fluctuations in business cycle through changes in government spending and tax revenue
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A foreign country to which we export but from which we do not import would do ______ according the Circular Flow Diagram?
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After the holiday season, many of us find ourselves thinking, “What will I do with another case for my iPad?” Often, both the gift giver and gift receiver could be made better off (that is, receive a higher level of utility or happiness) if cash had been given instead. To understand the economic rationale behind this, economists turn to the basic consumer theory model of budget constraints and indifference curves.
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Suppose you consume only two types of goods: magazines and food. You have $300…
Chapter 12 Solutions
Macroeconomics: Private and Public Choice
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