ESS OF ECON LL\AC 11E
11th Edition
ISBN: 9781264093083
Author: SCHILLER
Publisher: MCG
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Textbook Question
Chapter 3, Problem 6P
If a product becomes more popular
- Which curve will shift?
- Along which curve will
price and quantity move? - At the new
equilibrium price , will price quantity be higher or lower?
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Analyze the graph below, showing the Gross Federal Debt as a percentage of GDP for the
United States (1939-2019). Which of the following is correct?
FRED
Gross Federal Debt as Percent of Gross Domestic Product
Percent of GDP
120
110
100
60
50
40
90
30
1940
1950
1960
1970
Shaded areas indicate US recessions
1980
1990
2000
2010
1000
Sources: OMD, St. Louis Fed
myfred/g/U
In 2019, the Federal Government of the United States had an accumulated debt/GDP higher than
100%, meaning that the amount of debt accumulated over time is higher than the value of all goods
and services produced in that year.
The debt/GDP is always positive during this period, so the Federal Government of the United States
incurred in budget deficits every year since 1939.
From the mid-40s until the mid-70s, the debt/DGP was decreasing, meaning that the Federal
Government of the United States was running a budget surplus every year during those three decades.
During the second half of the 1970s, the Federal Government…
An imaginary country estimates that their economy can be approximated by the AD/AS model
below. How can this government act to move the equilibrium to potential GDP?
LRAS
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P
Y
Real GDP
E
SRAS
AD
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taxes, decreasing government expenditure or doing both simultaneously is mostly political
The AD/AS model shows that increasing taxes is the best fiscal policy available.
The AD/AS model shows that decreasing government expenditure is the best fiscal policy available.
The AD/AS model shows that an expansionary fiscal policy capable of shifting the AD curve to the
potential GDP level would decrease Real GDP but increase inflationary pressures
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