Expansionary Fiscal policy: This policy is followed by the government to expand the production activities in an economy. This is done by increasing the expenses and cutting the earnings of the government. Contractionary Fiscal policy: This policy is followed by the government to contract the production activities in an economy. This is done by reducing the expenses and increasing the earnings of the government.

Question

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Answer 1

Question

Chapter 17, Problem 1P

To determine

Concept Introduction:

Expansionary Fiscal policy: This policy is followed by the government to expand the production activities in an economy. This is done by increasing the expenses and cutting the earnings of the government.

Contractionary Fiscal policy: This policy is followed by the government to contract the production activities in an economy. This is done by reducing the expenses and increasing the earnings of the government.

Expert Solution & Answer

Explanation of Solution

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 1

Fig 1

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

a. Condition of Albernia.

In the given figure 1, the aggregate output that is Y₁is less than the potential output that is Y_P.

Therefore, this gives rise to recessionary gap.

Conclusion:

Thus, Albernia is facing recessionary gap.

b. Effect of fiscal policy.

Albernia uses expansionary fiscal policy, to bring the economy to the position where the economy can produce the desired output.

With the expansionary fiscal policy, the government spending will be increased. These policies include reduction in taxes, increase in purchase of goods and services by government.

Conclusion:

Thus, Albernia uses expansionary fiscal policy.

c. Macroeconomic situation.

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 2

Fig 2

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

After implementation of fiscal policy, the situation of Albernia is reflected in the given figure.

The recessionary gap has been removed and the economy came back to the equilibrium situation that is from E₁to E₂.

Conclusion:

Thus, inflationary gap has been removed.

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Students have asked these similar questions

??!!

. What the heck is this GDP thingy? It is Thursday afternoon, just a few days before the holiday season starts in your region, and you decided to visit your uncle Chao who owns a local delivery company. While sitting in the living room watching the evening news with your uncle, you heard the news reporter stating the following with an optimistic tone: "According to recent studies, gross domestic product (GDP) is rising due to an increase in consumer spending. The increase in spending was due to an increase in consumer confidence because the job market has shown a positive increase in both employment and income." Immediately, your uncle Chao looked at you with some confusion on his face and asked: What the heck is GDP, and why does the news dude seem excited about its increase? Does this “good” change in this GDP thingy have any effect on my delivery business? How? Do I need to do something different to prepare for the rise in GDP? How?

3. I need people who don’t want me! As an operations manager at a factory that produces manual tools, you were tasked with preparing a new site for expansion. The plan is to start production in the new location within 6 months from the current date. The new location requires 100 workers to operate fully. The workers you need don’t require any form of education or special skills because the tasks at the factory are simple and straightforward. In other words, you typically hire lower-skilled workers. In recent years, your company has been having problems finding workers who meet those criteria because the demand for them is so high. While sitting in your office, your teammate, Alejandra, walked to your office and said, "Have you heard the recent news about the economy? They said that investment has declined, and government spending has declined too. They also said that GDP is expected to shrink in the next 6 to 10 months. I wonder what is next." Then, she looked at you and said: How…

Answer 2

Question

Chapter 17, Problem 1P

To determine

Concept Introduction:

Expansionary Fiscal policy: This policy is followed by the government to expand the production activities in an economy. This is done by increasing the expenses and cutting the earnings of the government.

Contractionary Fiscal policy: This policy is followed by the government to contract the production activities in an economy. This is done by reducing the expenses and increasing the earnings of the government.

Expert Solution & Answer

Explanation of Solution

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 1

Fig 1

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

a. Condition of Albernia.

In the given figure 1, the aggregate output that is Y₁is less than the potential output that is Y_P.

Therefore, this gives rise to recessionary gap.

Conclusion:

Thus, Albernia is facing recessionary gap.

b. Effect of fiscal policy.

Albernia uses expansionary fiscal policy, to bring the economy to the position where the economy can produce the desired output.

With the expansionary fiscal policy, the government spending will be increased. These policies include reduction in taxes, increase in purchase of goods and services by government.

Conclusion:

Thus, Albernia uses expansionary fiscal policy.

c. Macroeconomic situation.

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 2

Fig 2

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

After implementation of fiscal policy, the situation of Albernia is reflected in the given figure.

The recessionary gap has been removed and the economy came back to the equilibrium situation that is from E₁to E₂.

Conclusion:

Thus, inflationary gap has been removed.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 17, Problem 1P

To determine

Concept Introduction:

Expansionary Fiscal policy: This policy is followed by the government to expand the production activities in an economy. This is done by increasing the expenses and cutting the earnings of the government.

Contractionary Fiscal policy: This policy is followed by the government to contract the production activities in an economy. This is done by reducing the expenses and increasing the earnings of the government.

Expert Solution & Answer

Explanation of Solution

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 1

Fig 1

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

a. Condition of Albernia.

In the given figure 1, the aggregate output that is Y₁is less than the potential output that is Y_P.

Therefore, this gives rise to recessionary gap.

Conclusion:

Thus, Albernia is facing recessionary gap.

b. Effect of fiscal policy.

Albernia uses expansionary fiscal policy, to bring the economy to the position where the economy can produce the desired output.

With the expansionary fiscal policy, the government spending will be increased. These policies include reduction in taxes, increase in purchase of goods and services by government.

Conclusion:

Thus, Albernia uses expansionary fiscal policy.

c. Macroeconomic situation.

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 2

Fig 2

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

After implementation of fiscal policy, the situation of Albernia is reflected in the given figure.

The recessionary gap has been removed and the economy came back to the equilibrium situation that is from E₁to E₂.

Conclusion:

Thus, inflationary gap has been removed.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 17, Problem 1P

To determine

Concept Introduction:

Expansionary Fiscal policy: This policy is followed by the government to expand the production activities in an economy. This is done by increasing the expenses and cutting the earnings of the government.

Contractionary Fiscal policy: This policy is followed by the government to contract the production activities in an economy. This is done by reducing the expenses and increasing the earnings of the government.

Expert Solution & Answer

Explanation of Solution

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 1

Fig 1

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

a. Condition of Albernia.

In the given figure 1, the aggregate output that is Y₁is less than the potential output that is Y_P.

Therefore, this gives rise to recessionary gap.

Conclusion:

Thus, Albernia is facing recessionary gap.

b. Effect of fiscal policy.

Albernia uses expansionary fiscal policy, to bring the economy to the position where the economy can produce the desired output.

With the expansionary fiscal policy, the government spending will be increased. These policies include reduction in taxes, increase in purchase of goods and services by government.

Conclusion:

Thus, Albernia uses expansionary fiscal policy.

c. Macroeconomic situation.

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 2

Fig 2

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

After implementation of fiscal policy, the situation of Albernia is reflected in the given figure.

The recessionary gap has been removed and the economy came back to the equilibrium situation that is from E₁to E₂.

Conclusion:

Thus, inflationary gap has been removed.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 17, Problem 1P

To determine

Concept Introduction:

Expansionary Fiscal policy: This policy is followed by the government to expand the production activities in an economy. This is done by increasing the expenses and cutting the earnings of the government.

Contractionary Fiscal policy: This policy is followed by the government to contract the production activities in an economy. This is done by reducing the expenses and increasing the earnings of the government.

Expert Solution & Answer

Explanation of Solution

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 1

Fig 1

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

a. Condition of Albernia.

In the given figure 1, the aggregate output that is Y₁is less than the potential output that is Y_P.

Therefore, this gives rise to recessionary gap.

Conclusion:

Thus, Albernia is facing recessionary gap.

b. Effect of fiscal policy.

Albernia uses expansionary fiscal policy, to bring the economy to the position where the economy can produce the desired output.

With the expansionary fiscal policy, the government spending will be increased. These policies include reduction in taxes, increase in purchase of goods and services by government.

Conclusion:

Thus, Albernia uses expansionary fiscal policy.

c. Macroeconomic situation.

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 2

Fig 2

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

After implementation of fiscal policy, the situation of Albernia is reflected in the given figure.

The recessionary gap has been removed and the economy came back to the equilibrium situation that is from E₁to E₂.

Conclusion:

Thus, inflationary gap has been removed.

Answer 6

Chapter 17, Problem 1P

To determine

Concept Introduction:

Expansionary Fiscal policy: This policy is followed by the government to expand the production activities in an economy. This is done by increasing the expenses and cutting the earnings of the government.

Contractionary Fiscal policy: This policy is followed by the government to contract the production activities in an economy. This is done by reducing the expenses and increasing the earnings of the government.

Expert Solution & Answer

Explanation of Solution

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 1

Fig 1

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

a. Condition of Albernia.

In the given figure 1, the aggregate output that is Y₁is less than the potential output that is Y_P.

Therefore, this gives rise to recessionary gap.

Conclusion:

Thus, Albernia is facing recessionary gap.

b. Effect of fiscal policy.

Albernia uses expansionary fiscal policy, to bring the economy to the position where the economy can produce the desired output.

With the expansionary fiscal policy, the government spending will be increased. These policies include reduction in taxes, increase in purchase of goods and services by government.

Conclusion:

Thus, Albernia uses expansionary fiscal policy.

c. Macroeconomic situation.

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 2

Fig 2

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

After implementation of fiscal policy, the situation of Albernia is reflected in the given figure.

The recessionary gap has been removed and the economy came back to the equilibrium situation that is from E₁to E₂.

Conclusion:

Thus, inflationary gap has been removed.

Answer 7

Chapter 17, Problem 1P

To determine

Concept Introduction:

Expansionary Fiscal policy: This policy is followed by the government to expand the production activities in an economy. This is done by increasing the expenses and cutting the earnings of the government.

Contractionary Fiscal policy: This policy is followed by the government to contract the production activities in an economy. This is done by reducing the expenses and increasing the earnings of the government.

Answer 8

Expert Solution & Answer

Explanation of Solution

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 1

Fig 1

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

a. Condition of Albernia.

In the given figure 1, the aggregate output that is Y₁is less than the potential output that is Y_P.

Therefore, this gives rise to recessionary gap.

Conclusion:

Thus, Albernia is facing recessionary gap.

b. Effect of fiscal policy.

Albernia uses expansionary fiscal policy, to bring the economy to the position where the economy can produce the desired output.

With the expansionary fiscal policy, the government spending will be increased. These policies include reduction in taxes, increase in purchase of goods and services by government.

Conclusion:

Thus, Albernia uses expansionary fiscal policy.

c. Macroeconomic situation.

Essentials of Economics, Chapter 17, Problem 1P , additional homework tip 2

Fig 2

On the Y-axis, aggregate price level is measured and on X-axis, real GDP is measured.

After implementation of fiscal policy, the situation of Albernia is reflected in the given figure.

The recessionary gap has been removed and the economy came back to the equilibrium situation that is from E₁to E₂.

Conclusion:

Thus, inflationary gap has been removed.