Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
7th Edition
ISBN: 9781305242500
Author: N. Gregory Mankiw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 23, Problem 3PA
Subpart (a):
To determine
Effect of government action on level of investment.
Subpart (b):
To determine
Explain whether government have any incentive to renege on its policy.
Subpart (c):
To determine
Explain what the government can do to increase the credibility of announced policy change.
Subpart (d):
To determine
Explain the reason for the situation is similar to the problem of time inconsistency.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
During the third quarter of 1997, Japanese GDP was falling at an annual rate of over 11 percent. Many blamed the big increase in Japan's taxes in the spring of 1997, which was designed to balance the budget.
a. Explain how an increase in taxes with the economy growing slowly could cause a recession.
b. If you were head of the Japanese central bank (the same as our FED), how would you respond? What impact would your policy have on the level of investment?
The government of Prime Minister Shinzo Abe said it would offer some $15 billion in financing for businesses hit by the novel coronavirus and spend about $4 billion directly to prop up the economy.“As the top priority for the time being, we have to put all our effort into keeping businesses alive,” Mr. Abe said.Still, in a $5 trillion economy, the measures may not be big enough to dig the country out of a big hole. SMBC Nikko Securities economist Junichi Makino said he expected the Japanese economy to shrink at an annualized pace of 5.8% in the January-to-March period following a 7.1% contraction in the last quarter of 2019.Japan is set to offer emergency no-interest loans of about $1,900 to newly jobless people and others in trouble, and the borrowers may not have to pay the money back if they can’t find work. Businesses at risk from the virus can access financing or loan guarantees from the government
QUESTIONS:
1. How would the financing plan designed to supports businesses impact the…
According to the logic of the investment demand curve in the IS model, which of the following statements is correct?
Select one or more:
Oa When R is equal to F, monetary policy is neutral and investment as a share of output Y is at the level determined by a,Y.
O b. When R is equal to F, monetary policy is neutral and investment as a share of output Y is 0.
The value of F is determined the marginal product of capital, a supply side feature of the economy
Od. When R is greater than F, monetary policy is stimulating total spending.
Chapter 23 Solutions
Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
Ch. 23.1 - Prob. 1QQCh. 23.2 - Prob. 2QQCh. 23.3 - Prob. 3QQCh. 23.4 - Prob. 4QQCh. 23.5 - Prob. 5QQCh. 23.6 - Prob. 6QQCh. 23 - Prob. 1QRCh. 23 - Prob. 2QRCh. 23 - Prob. 3QRCh. 23 - Prob. 4QR
Ch. 23 - Prob. 5QRCh. 23 - Prob. 6QRCh. 23 - Prob. 7QRCh. 23 - Prob. 8QRCh. 23 - Prob. 9QRCh. 23 - Prob. 10QRCh. 23 - Prob. 1QCMCCh. 23 - Prob. 2QCMCCh. 23 - Prob. 3QCMCCh. 23 - Prob. 4QCMCCh. 23 - Prob. 5QCMCCh. 23 - Prob. 6QCMCCh. 23 - Prob. 1PACh. 23 - Prob. 2PACh. 23 - Prob. 3PACh. 23 - Prob. 4PACh. 23 - Prob. 5PACh. 23 - Prob. 6PACh. 23 - Prob. 7PACh. 23 - Prob. 8PA
Knowledge Booster
Similar questions
- Please helparrow_forwardWhich of the following is correct? a. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left. b. An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. c. An increase in stock prices reduces consumption spending so that aggregate demand shifts left. d. An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.arrow_forwardSupply-side economics advocates that the government A. do all in its power to stimulate growth; B. do all in its power to limit growth; C. set quotas on production.arrow_forward
- Please use the AD-AS model to analyze the effects of monetary policy and fiscal policy on economic outcome in an open economy: a. Please show graphically the shifting of the AD curve after the Fed conducts an expansionary monetary policy in a closed economy (A closed economy means there is no international trade.). How do the price level and the real GDP change? b. Suppose the economy becomes an open economy. Please revise the result that you get in part (a). Please explain how you get the new result using the AD-AS model. c. Please show graphically the shifting of the AD curve after the federal government conducts an expansionary fiscal policy in a closed economy. Please show the crowding-out effect. How do the price level and the real GDP change? d. Suppose the economy becomes an open economy. Please revise the result that you get in part (c). Please explain how you get the new result based on the AD-AS model.arrow_forwardSuppose the U.S. has an investment opportunity which costs $200 which will increase output from 100 to 110 per quarter. The investment would take effect after t = 0. What is the marginal product of capital (MPK)? What is the difference in the present value of future income in the U.S. of undertaking the investment if the real world interest rate is 8%? Should the U.S. borrow from abroad to fund the investment and why? TYPO*. Increased output from 100 to 110 per YEAR (not quarter).arrow_forward2. Let's create a simple, two-period neoclassical model In this question, in period t you only use labor to make period t output, and then you decide how much of that output to convert into capital that can be used later to help make period t+1 output. That means the "representative agent" has to decide how much of period t output to consume rather than save, but there's no such choice in period t+1. After all, t+1 is the end of time. Output is made in this very simple, constant returns to scale manner, so in each period double the input creates double the output: Y₁ = N₁ Y zK = You get log utility from consumption in the first period, but square root in the second period Of course, you don't like work, so extra hours of work hurt your utility: U = ln(Ct) — mNt + 2(Ct+1)¹/² In this simple economy with no externalities and perfect property rights, Adam Smith's Invisible Hand Theorem will hold in its most optimistic form: A benevo- lent social planner and a decentralized private market…arrow_forward
- The question is based on open economy Macroeconomics (photo attached).arrow_forwardis monetary policies in dealing with the consequences of recession is better than the use of fiscal policies?arrow_forwardWhat were the monetary and fiscal policy responses to the Great Recession? Discuss their effectiveness and how the policy contributed to GDP growth.arrow_forward
- b. How do fiscal and monetary policies differ in their approaches to managing the economy during periods of recession? Provide examples of each policy tool.arrow_forwardIn the years leading up to the global financial crisis (say, around 2005-06), the large U.S. federal government deficits have not led to high long-term interest rates (unlike in the 1980s). Which of the followings may not be a possible explanation?a. global saving glut (in excess of global investment).b. foreign exchange intervention by central banks in East Asia (i.e., purchases of US Tbonds) as part of their efforts to promote the exports via keeping their currencies undervalued (or at least preventing their currencies from appreciating).c. Saving surpluses of oil exporters, such as Saudi Arabia.d. strong stock market rebound.e. None of the above.arrow_forwardAssume the graph below indicates the long-run impact on the loanable funds market of a closed economy. S₂ S1 r 12 r₁ l® I, S 12 1₁ Select all scenarios for which the above graph correctly illustrates the long-run effect according to the classical model. Note: This is a multiple-answer question; thus, more than one option may be correct. A. A decrease in taxes. B. A decrease in transfer payments. C. A decrease in government expenditure. D. An increase in government expenditure. Assume the graph below indicates the long-run impact on the loanable funds market of a closed economy. S₁ 71 1(r) 1,S 12 4 Select all scenarios for which the above graph correctly illustrates the long-run effect according to the classical model. Note: This is a multiple-answer question, thus, more than one option may be correct a. A decrease in taxes. b. A decrease in transfer payments. CA decrease in government expenditure. d. An increase in government expenditure.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning