Essentials of Economics (MindTap Course List)
7th Edition
ISBN: 9781285165950
Author: N. Gregory Mankiw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 24, Problem 11PA
Subpart (a):
To determine
Expansionary fiscal policy, investment accelerator, and interest rate sensitivity to investment.
Subpart (b):
To determine
Expansionary fiscal policy, investment accelerator, and interest rate sensitivity to investment.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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?
A number of articles published in the Wall Street Journal in the pastyear convince Americans to save more in financial markets andintermediaries to prepare for retirement. The ______ curve in theloanable funds market shifts ______, driving the equilibrium interestrate ______.a. Demand, right, upb. Demand, left, downc. Supply, right, downd. Supply, left, up
Assume the economy is starting at point B in the graph below.
Interest Rate (percent per year)
D
4
a. an interest rate cut?
E
B
F
Investment demand
Investment demand
Rate of Investment (billions of dollars per year)
Which point demonstrates the effects on investment of
2
1
From point B to (Click to select)
b. an interest rate cut accompanied by decreased sales expectations?
From point B to (Click to select)
Chapter 24 Solutions
Essentials of Economics (MindTap Course List)
Knowledge Booster
Similar questions
- As interest rates rise, the effect on aggregate demand is to Select one: a. increase firm borrowing and investment spending. b. increase only firm borrowing. c. reduce consumer borrowing and consumption spending. d. increase consumer borrowing and saving.arrow_forwardThe image attached, is a screen shot of the question. The question is: If the marginal propensity to consume was 0.8, low large would each of the following need to be in order to restore full-employment equilibrium? A. A tax increase ________billion B. A government spending cut $_________billion C. A cut in income transfers $________billion. I need to know how to figure this out. Again the screen shot of the question with the graph it attached.arrow_forwardGovernments attempt to stimulate economics by offering firms temporary investment taxcredits. Explain the effects of this measure on investment spending. Would you expect apermanent or temporary measure to have more effect?arrow_forward
- Now consider an economy in which the government lowers its spending. In the long run, the result would be _____________ in the price level and _____________ in real output. an increase; an increase a decrease; no change a decrease; a decrease None of the listed options is correct. no change; a decreasearrow_forwardShould fiscal policy encourage more consumption or more saving? Does it matter? I need a reason why.arrow_forwardWhich of the following would not be classified as Expenditure Reducing Policies? Select one: a. None of the answers is correct b. All the answers are correct c. Using Fiscal and monetary policies d. Policies to improve competitiveness e. Devaluing the exchange ratearrow_forward
- a. What are the fiscal policy tools the government can use to expand an economy that is in a recession? Explain the interaction between monetary and fiscal policy?b. Explain how monetary policy is expected to affect investment and aggregate expenditure and discuss its connection with interest rates and output?arrow_forwardUse the graph to answer the following question: Investment Demand D D, Quantity of Investment If the market for investment is initially in equilibrium at point A, but then implementation of fiscal policy causes crowding out to occur, the equilibrium in the market will likely A. remain at point A. B. move toward point B. C. move toward point C. D. move toward point D. Interest Ratearrow_forwardWhat are the likely consequences of a government implementing a policy of austerity during a period of economic recession? A. It would stimulate economic growth by increasing consumer confidence. B. It would lead to a decrease in the unemployment rate. C. It would potentially deepen the recession by reducing overall demand. D. It would have no effect on the economy's performance.arrow_forward
- - Practice.pdf Osterling/Downloads/Macro%20Practice.pdf #18. Because monetary and fiscal lags are long and variable: a. stronger policies must be used. b. successful stabilization policy is completely impossible. c. attempts to stabilize the economy are often destabilizing. d. policy must be completely passive. #19. If government debt is not changing, then: a. the economy is at long-run equilibrium. b. the government's budget must be balanced. GDP must equal the natural rate of output. d. capital per worker is constant. C. #20. One policy response to the 2008 financial crisis in the U.S. was to increas This policy response can be represented in the IS-LM model by shifting the a. LM; right| b. LM; left c. IS, right d. IS: leftarrow_forwardIf Investment = f(r*) a. Explain with pictures how it affects the balance of Supply/Saving and Investment Demand in the event of Fiscal policy, namely by decreasing state spending and increasing taxes. b. Explain with pictures how it affects the balance of Supply/Saving and Investment Demand in the event of Fiscal policy, namely by decreasing state spending and increasing taxes if it happens overseasarrow_forwardGiven the following information, answer the question. Autonomous consumption = R100 million Investment spending = R300 million Government spending = R200 million Taxes = R60 million Marginal propensity to consume = ¾ The equilibrium level of output and income is equal to ______. Select one: A. R2 160 million B. R2 580 million C. R2 640 million D. R2 220 millionarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781285165912Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781305971509Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:Cengage Learning