Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 27, Problem 2.4P
Sub part (a):
To determine
Identify the role of expansionary fiscal policy and expansionary
Sub part (b):
To determine
Identify the role of expansionary fiscal policy and contractionary monetary policy on the interest rate and aggregative output.
Sub part (c):
To determine
Identify the role of contractionary fiscal policy and expansionary monetary policy on the interest rate and aggregative output.
Sub part (d):
To determine
Identify the role of contractionary fiscal policy and contractionary monetary policy on the interest rate and aggregative output.
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Start with a brief introduction that explains use of Government policy to control the economy.
When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.
When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.
What specific fiscal policy tools would you use to stimulate aggregate demand and how?
What specific monetary policy tools would you use to stimulate aggregate demand and how?
What is your conclusion, should policymakers use the monetary and or fiscal policy, or a combination of both, to stimulate aggregate demand? Explain your reasoning.
As you have learned in Unit 8 (this week), monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard: a. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? b. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? c. What specific fiscal policy tools would you use to stimulate aggregate demand and how? d. What specific monetary policy tools would you use to stimulate aggregate demand and how? e. What is your conclusion, should policymakers use the monetary and or fiscal policy to stimulate aggregate demand? Explain briefly.
What is the advantage of monetary policy over fiscal policy?
O. Monetary policy can be implemented faster than fiscal policy
O. Once implemented, the effect of monetary policy can be realized faster than fiscal policy
O. The monetary policy affecting Investment category, which is more flexible than the Consumption and Government expenditure category
O. Monetary policy is more effective at reducing the recessionary/inflationary gap
Chapter 27 Solutions
Principles of Economics (12th Edition)
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