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The effects of discretionary fiscal policy as per Keynesian model.
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Explanation of Solution
When the government uses its discretionary fiscal policy, it uses its tool of government spending and government
Consider a case, where government uses expansionary fiscal policy to increase the real GDP. The government will increase government expenditure or reduces taxes or use a combination of both. The use of expansionary fiscal policy by government shifts the IS curve to the right from IS to IS’. Note that, the LM curve is horizontal because we are dealing with Keynesian
Introduction:
Discretionary Fiscal Policy: It is a tool used by the government to achieve equilibrium level of GDP during different economic situations. The policy mainly focuses on government spending and its taxation tools.
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Chapter 13 Solutions
Economics Today (19th Edition)
- Suppose there is a new preventative treatment for a common disease. If you take the preventative treatment, it reduces the average amount of time you spend sick by 10%. The optimal combination of Z (home goods) and H (health goods). both may increase both may increase or one may stay the same while the other increases. both may decrease H may increase; Z may not change Z may increase; H may decreasearrow_forwardIn the Bismarck system,. may arise. neither selection both adverse and risk selection ☑ adverse selection risk selectionarrow_forwardPls fill out/explain to me these notes and explanations, thanksarrow_forward
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