a)
The means in terms of the AD-AS model when using monetary or fiscal policy to pump up the economy is counterproductive.
a)
Explanation of Solution
The use of monetary or fiscal policy pumps up the economy is counterproductive and a person has a high brief but after that, he/she gets the pain of inflation then, there would be an increase in aggregate
Introduction: Fiscal policy is a policy through which government spending and tax policies are used to make economic conditions better. And, the
b)
The reason whether it is a valid argument against the stabilization policy.
b)
Explanation of Solution
No, it is not a valid argument against stabilization policy because both fiscal and monetary policies are useful and effective policy tools that help to void negative demand shocks in the economy. And, they can sort out the recessionary gap only by moving the aggregate demand curve back to the potential output, therefore, it is not a valid argument against stabilization policy in the economy.
Introduction: Fiscal policy is a policy through which government spending and tax policies are used to make economic conditions better. And, the monetary policy increases or decreases the supply of money with the control of interest rates.
Chapter 20 Solutions
Krugman's Economics For The Ap® Course
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