Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 36, Problem 3QCMC
To determine
Argument against setting policy by discretion.
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Analysis of the Great Depression indicates that
a. even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic downturn.
b. the depth of the economic plunge, if not its onset, was the result of monetary, fiscal, and regulatory policies.
c. a reduction in tax rates could not prevent the economic downturn from spiraling into a depression.
d. even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s.
0000
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?
Economists predict the business cycle well enough that stabilization policy is likely to work despite lags in the effects of policy.
a.true
b.false
Chapter 36 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
Ch. 36.1 - Prob. 1QQCh. 36.2 - Prob. 2QQCh. 36.3 - Prob. 3QQCh. 36.4 - Prob. 4QQCh. 36.5 - Prob. 5QQCh. 36.6 - Prob. 6QQCh. 36 - Prob. 1QRCh. 36 - Prob. 2QRCh. 36 - Prob. 3QRCh. 36 - Prob. 4QR
Ch. 36 - Prob. 5QRCh. 36 - Prob. 6QRCh. 36 - Prob. 7QRCh. 36 - Prob. 8QRCh. 36 - Prob. 9QRCh. 36 - Prob. 10QRCh. 36 - Prob. 1QCMCCh. 36 - Prob. 2QCMCCh. 36 - Prob. 3QCMCCh. 36 - Prob. 4QCMCCh. 36 - Prob. 5QCMCCh. 36 - Prob. 6QCMCCh. 36 - Prob. 1PACh. 36 - Prob. 2PACh. 36 - Prob. 3PACh. 36 - Prob. 4PACh. 36 - Prob. 5PACh. 36 - Prob. 6PACh. 36 - Prob. 7PACh. 36 - Prob. 8PA
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Similar questions
- If the U.S. Congress passes legislation to raise taxes to control inflation, what kind of policy is this? Group of answer choices A. Expansionary monetary policy B. Contractionary fiscal policy C. Contractionary monetary policy D. Expansionary fiscal policyarrow_forwarda) Discuss monetary policy and fiscal policy by comparing and contrasting their effects in the short run and in the long run. b) Why do we say that monetary policy is neutral in the long run? If so, why is it being used and considered as useful? c) Can we say that fiscal policy is neutral as well?arrow_forwarda. Which of the following are considered limitations of fiscal policy? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. ? implementation lag ? unemployment lag ? recognition lag ? liquidity lag ? legislative lag b. Which of the following are considered limitations of monetary policy? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. ? unemployment lag ? implementation lag ? recognition lag ?liquidity lag ? legislative lagarrow_forward
- If the Bank of Canada believes the economy is about to fall into recession, what actions should it take? If the Bank of Canada believes the inflation rate is about to increase, what actions should it take? If the Bank of Canada believes the economy is about to fall into recession, it should A. use an expansionary fiscal policy to increase the interest rate and shift AD to the right. B. use a contractionary monetary policy to lower the interest rate and shift AD to the left. OC. use its judgment to do nothing and let the economy make the self adjustment back to potential GDP. O D. use an expansionary monetary policy to lower the interest rate and shift AD to the right. If the Bank of Canada believes the inflation rate is about to increase, it should O A. use a contractionary fiscal policy to increase the interest rate and shift AD to the left. O B. use an expansionary monetary policy to lower the interest rate and shift AD to the right. OC. use a combination of tax increases and…arrow_forwardWhat 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 gaparrow_forwardThe government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. 1. Which of the following statements about the debate over stabilization policy are correct? Check all that apply. A)Opponents of active stabilization policy believe that significant time lags in both fiscal and monetary policy often exacerbate economic fluctuations. B)Opponents of active stabilization believe that active fiscal and monetary policies have no effect on aggregate demand. C)Advocates of active stabilization believe that automatic stabilizers have no effect on aggregate demand. D)Advocates of active stabilization believe that implementation lags for fiscal and monetary policy do not exist. 2. Which of the following are examples of automatic stabilizers? Check all that apply. A)The federal funds rate B)Corporate income taxes C) Personal income…arrow_forward
- *Does monetary or fiscal policy have a longer time lag? Why?arrow_forwardWrite True if the answer is true. If the statement is False, provide an explanation as to why it is so. 1. Fiscal policies tend to be automatic as a result of legislation. 2. Taxes always act as automatic stabilizers. 3. Contractionary monetary policies result to lower investment spending and higher incomes. 4. Inflation targeting is a mandate exclusive to the Bangko Sentral ng Pilipinas. 5. Expansionary monetary policies result to an increase in real GDP.arrow_forwardQUESTION 3 Match the following terms with their definitions. Recognition Lag Policy Lag Implementation Lag Impact Lag Discretionary Macroeconomic Policy Automatic Stabilizers Fiscal Policy…arrow_forward
- Explain what kind of fiscal policy and what kind of monetary policy are likely to reduce GDP.arrow_forwardExplain each of these statements supported by reasonable reasoning: 1. Credibility is important in the implementation of Monetary Policy. 2. Fiscal Policy is difficult to be implemented as it involves inside and outside lags.arrow_forwardX 8. Using policy to stabilize the economy The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Businesses make investment plans many months in advance. Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. The current tax system acts as an automatic stabilizer. Which of the following are examples of automatic stabilizers? Check all that apply. Unemployment insurance benefits Corporate income taxes The discount rate C O 1:24 PM 4/29/2022arrow_forward
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