Macroeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859477
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Question
Chapter 15, Problem 14E
To determine
Determine the given statement is associated with which school of thought :-
"Government policymakers should use fiscal policy to adjust aggregate
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How does increased government spending affect the aggregate demand curve?
"Tax cuts are more effective in generating the economy when the economy is in recession compared to at full employment." True or False? Show and explain your answer based on the AD-AS model.
A stimulative monetary or fiscal action should increase aggregate demand. What factors may limit the actual increase in aggregate demand?
Chapter 15 Solutions
Macroeconomics (MindTap Course List)
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Similar questions
- Compare and contrast the classical and Keynesian views of aggregate demand and aggregate supply.arrow_forwardFrom the perspective of someone using aggregate-demand and aggregate supplyanalysis, what is the impact of a tax cut when the economy is operating above fullemployment. Is this a wise policy? Why or why not?arrow_forwardExtra Credit The economy of the country Keinesia is heavily dependent on imported oil. Due to a crisis in the Middle East, the oil price has sharply increased. 1. What do you expect to happen to the equilibrium output and prices? Use the AD-AS model to illustrate it. 2. You are the economic adviser to the president of Keinesia. a. Would you advise him/her to implement Fiscal Policy? b. What type of Fiscal Policy would you recommend? c. Illustrate the effect of the Fiscal Policy on the equilibrium output and prices? Use the AD- AS model in part (a) to illustrate it.arrow_forward
- How would a Keynesian Economist use Fiscal Policy to fight a Recession? Please do not write about Monetary Policy here, only Fiscal Policy.arrow_forwardDraw the aggregate demand model and show how government spending impacts the model. Please label the diagram. and inform of what has occured.arrow_forwardWhat does an aggregated demand curve look like?arrow_forward
- Using the AD/AS model construct two graphs that show how a recession can occur? Explain how discretionary fiscal or monetary policies can be used to moved the economy out of recession?arrow_forwardGovernment Spending and How it Affects Aggregate Demandarrow_forwardBased on the AD-AS framework, carefully explain how the fiscal stimulus would affect the following variables in the short run: household consumption, business investment, real GDP, price level. You may include a well-labeled diagram to support your analysis.arrow_forward
- An increase in household consumption may increase output and the price level. Explain how monetary and fiscal policies can be used to keep the stability of the price level. Use relevant graphs to support your answer.arrow_forwardAggregate demand and aggregate supply. Aggregate demand and aggregate supply can be influenced by several groups of economic actors. Who are these actors and how do they influence AD and AS?arrow_forwardA change in any factor that influences our planned expenditure other than the price level, brings a change in aggregate demand. One of these factors is fiscal and monetary policy.” In terms of the statement above, assess how fiscal and monetary policy influences aggregate expenditure in an economy. Use appropriate diagrams to motivate your answer.arrow_forward
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