Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781305176799
Author: Gwartney
Publisher: Cengage
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Chapter 15, Problem 12CQ
To determine
Explain the reason to agreeing or disagree with the perspective.
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Chapter 15 Solutions
Macroeconomics: Private and Public Choice
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- Discuss three reasons why the use of fiscal policy to stabilize the economy is more complicated than suggested by the basic Keynesian model.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_forwardexplain the keynesian theory of high public spending to stimulate economic growth?arrow_forward
- The Focus box “Can a Budget Deficit Reduction Lead to an Output Expansion? Ireland in the 1980s” provides an example of fiscal consolidation. Ireland had a large budget deficit in 1981 and 1982. Although the data shows strong output growth from 1987 to 1989, there is some evidence of continued macroeconomic weakness in Ireland during the second fiscal consolidation. What is that evidence?arrow_forwardIn the short-run framework, budget deficits should: Choose correct and explain why never be run since they slow economic growth over the long run. never be run since they crowd out investment in the short run. be run on a temporary basis whenever the economy is below potential output. be run on a permanent basis since they can always be financed by printing money.arrow_forwardAccording to the traditional Keynesian analysis, if the government increases spending and pays for all of it by raising current taxes, then a budget deficit will occur. a budget surplus will occur. aggregate demand will decrease. aggregate demand will increase.arrow_forward
- With the aid of appropriate diagrams, briefly explain the impact of a fiscal restraint under an IMF-supported reform programme on employment, wages, output, interest rates and prices assuming the Ghanaian economy can be characterized as a Keynesian economic system.arrow_forwardAccording to traditional Keynesian analysis, a tax cut has a larger effect on aggregate demand than an increase in government expenditures of the same size. a.true b.falsearrow_forwardKeynes advocated the use of fiscal and monetary policy to stabilize an economy? When are the effects of these policies most beneficial? Select all that apply. Select one or more: In the short run When the economy is operating at full employment When the economy is operating significantly above full employment When the economy is operating significantly below full employment In the long runarrow_forward
- Identify how planned investment will change in each scenario. In an effort to reduce constant budget deficits, Congress announces plans to increase the corporate income tax rate. Due to the Congress, planned investment will increase, decrease, or stay the same? A major recession has reduced consumption spending, which has hurt profit levels for Aston-Benz, a high-end car manufacturer. Due to the recession, planned investment will increase, decrease, or stay the same?arrow_forwardIn the context of macroeconomic stabilization policies, which scenario best illustrates the concept of "automatic stabilizers"? a) A government increases spending on infrastructure projects during a recession as part of a deliberate fiscal stimulus package. b) During an economic downturn, unemployment benefits automatically increase as more people become unemployed, providing a buffer to the economy. c) The central bank adjusts the interest rates in response to changes in inflation and unemployment data. d) A government adopts a new policy to increase taxes on high-income earners during periods of economic boom.arrow_forwardDescribe a situation in an economy that John Maynard Keynes would believe needs government support. Explain why.arrow_forward
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