Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 27, Problem 2DQ
To determine
Built-in stability mechanism in the economy.
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Economics: Principles and Policy (MindTap Course List)
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- Why might “belt-tightening” by consumers in a recession be unwelcome?arrow_forwardWhat is the difference between an expansionary(inflationary gap) gap and contractionary(recessionary) gap?arrow_forward1) https://openstax.org/books/principles-macroeconomics-2e/pages/9-4-the-confusion-over-inflation 2) https://openstax.org/books/principles-macroeconomics-2e/pages/9-5-indexing-and-its-limitations please I need a short summary about these articles.arrow_forward
- Q10arrow_forwardSuppose the public expects a 7 percent inflation rate, while the Federal Reserve unexpectedly allows the money growth rate to be 4 percent. In the short run, we expect that investment spending by firms will and consumer durable spending will 000 decrease; decrease increase; increase decrease; increase increase; decreasearrow_forwardWhy is inflation a macroeconomic problem? Why can't an inflation rate of 0% be achieved?arrow_forward
- A stable inflation rate is necessary to forecast business activities and make better investment decisions. * True or false?arrow_forwardWhat does it mean when we say that the inflation gap isnegative?arrow_forwardIn the year 2023, aggregate demand and aggregate supply in the fictional country of Marjan are represented by the curves AD2023 and AS on the following graph. Suppose the natural level of output in this economy is $10 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. 108 AS 107 LRAS 106 А Outcome C 105 104 AD, 2023 AD A 103 102 ADB 101 100 8 10 12 14 16 4 OUTPUT (Trillions of dollars) Economists have forecast that if the government does nothing and the economy continues to grow at the current rate, aggregate demand in 2024 will be given by the ADA curve, resulting in the outcome illustrated by point A. If the government pursues a contractionary policy, aggregate demand in PRICE LEVEL 2]arrow_forward
- The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 3% per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be?arrow_forwardAn increase in household consumption may increase output and the price level. Explain how monetary and fiscal policies can be used to keep the stability of the price level. Use relevant graphs to support your answer.arrow_forwardSome of the practical problems relating to implementing expansionary Keynesian policy relate to lags. What are these lags and why are they problematic? It’s crucial to use some sort of example. arrow_forward
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