Homework Answers
As the actual expenditure falls, the total GDP reduces. Also since the projects are delayed , more people are unemployed and hence price level falls.
Decrease, decrease.
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FISCAL POLICY 5 (173) increase; increase Suppose the government decides to delay several infrastructure projects, we...
49. Suppose now that the government decides to use fiscal policy to ameliorate the effect of...
49. Suppose now that the government decides to use fiscal policy to ameliorate the effect of the negative shock on investment. Use the model of aggregate demand and aggregate supply provided below to illustrate graphically what the government can do to respond to the sudden decrease in investment, and what the impact of government action will be, in the long-run, on prices and output. You must explain each step of the process. Price level 1 Quantity of Output a) Decrease...
FISCAL POLICY IN-CLASS WORKSHEET 2 This question explores the role of expansionary and contractionary fiscal policy...
FISCAL POLICY IN-CLASS WORKSHEET 2 This question explores the role of expansionary and contractionary fiscal policy in the Aggregate Demand and Aggregate Supply model. You will use schedules for an aggregate demand line and an aggregate supply line to identify the equilibrium price level and real GDP in a macroeconomy. Additionally, you will compare the short-run equilibrium level of real GDP to the full employment level of real GDP to identify desirable fiscal policies. Below, you are provided the schedules...
1. Suppose the federal government observes an increase in gross investment. Examine this event in terms of the aggregate...
1. Suppose the federal government observes an increase in gross investment. Examine this event in terms of the aggregate demand and aggregate supply model. a. The increase in gross investment will cause (Click to select) [an increase in aggregate demand / a decrease in short-run aggregate supply / an increase in short-run aggregate supply / a decrease in aggregate demand]. b. This will lead to (Click to select) [a decrease / an increase] in the price level and (Click to select)...
- Problem set o Seved Help Limitations of Fiscal Policy Exercise 2 The graph below depicts...
- Problem set o Seved Help Limitations of Fiscal Policy Exercise 2 The graph below depicts an economy where a decline in aggregate demand has caused a recession. The economy's current level of real GDP (Y) is below its long-run equilibrium, which is illustrated by the long-run aggregate supply curve (LRAS), and a price level (P4) below the equilibrium value of Pe a. Use the graph to illustrate what happens when government-enacted expansionary fiscal policy happens too slowly-that is, when...
1. Suppose the federal government observes a decrease in net exports. Examine this event in terms...
1. Suppose the federal government observes a decrease in net exports. Examine this event in terms of the aggregate demand and aggregate supply model. a. The decrease in net exports will cause (Click to select) [a decrease in short-run aggregate supply / an increase in short-run aggregate supply / an increase in aggregate demand / a decrease in aggregate demand]. b. This will lead to (Click to select) [a decrease / an increase] in the price level and (Click to select)...
Compare the effects of an expansionary fiscal policy action—an increase in government spending financed by government...
Compare the effects of an expansionary fiscal policy action—an increase in government spending financed by government bond sales to the public, for example—in the Keynesian and classical models. Include in your answer the effects of this policy shift on the level of real income, employment, the price level, and the rate of interest.
4. Evaluating fiscal policy Aa Aa The graph below shows an economy's government expenditures (G) ...
4. Evaluating fiscal policy Aa Aa The graph below shows an economy's government expenditures (G) and tax revenues (T) at different levels of real GDP G AND T Billions of dollars) 280 T 2008 270 260 250 240 230 220 210 200 600 640 680 720 760 REAL 00P (Bitions of dollars) Hee Clear AL Suppose the economy's full-employment level of real GDP is $680 billion. In 2006, the economy was operating at its full-employment output level, so the standardized...
Suppose the federal government observes an increase in gross investment. Examine this event in terms of...
Suppose the federal government observes an increase in gross investment. Examine this event in terms of the aggregate demand and aggregate supply model. a. The increase in gross investment will cause (Click to select) b. This will lead to (Click to select)in the price level and (Click to select) in real GDP IClick to select) fiscal policy will be used to (Click to select) C. d. The fiscal policy actions may include (Click to select) in taxes and/or [(Ciek to...
Suppose the federal government observes an increase in gross investment. Examine this event in terms of the aggrega...
Suppose the federal government observes an increase in gross investment. Examine this event in terms of the aggregate demand and aggregate supply model. a. The increase in gross Investment will cause (Click to select) b. This will lead to Click to select) in the price level and Click to select) in real GDP c. (Click to select) fiscal policy will be used to Click to select) Click to select) d. The fiscal policy actions may include in taxes and/or Click...
Among the most important problems of implementing fiscal policy include all except which of the following?...
Among the most important problems of implementing fiscal policy include all except which of the following? Correctly timing the desired fiscal stimulus, given the inevitable lags and forecasting errors Determining how large a stimulus to apply Assessing when policy actions should be reversed Determining how long a time lag to apply If the central bank does not use accommodating monetary policy, a fiscal stimulus is likely to increase interest rates, which in turn, will cause planned investment to decrease. What...
49. Suppose now that the government decides to use fiscal policy to ameliorate the effect of the negative shock on investment. Use the model of aggregate demand and aggregate supply provided below to illustrate graphically what the government can do to respond to the sudden decrease in investment, and what the impact of government action will be, in the long-run, on prices and output. You must explain each step of the process. Price level 1 Quantity of Output a) Decrease...
- Problem set o Seved Help Limitations of Fiscal Policy Exercise 2 The graph below depicts an economy where a decline in aggregate demand has caused a recession. The economy's current level of real GDP (Y) is below its long-run equilibrium, which is illustrated by the long-run aggregate supply curve (LRAS), and a price level (P4) below the equilibrium value of Pe a. Use the graph to illustrate what happens when government-enacted expansionary fiscal policy happens too slowly-that is, when...
4. Evaluating fiscal policy Aa Aa The graph below shows an economy's government expenditures (G) and tax revenues (T) at different levels of real GDP G AND T Billions of dollars) 280 T 2008 270 260 250 240 230 220 210 200 600 640 680 720 760 REAL 00P (Bitions of dollars) Hee Clear AL Suppose the economy's full-employment level of real GDP is $680 billion. In 2006, the economy was operating at its full-employment output level, so the standardized...
Suppose the federal government observes an increase in gross investment. Examine this event in terms of the aggregate demand and aggregate supply model. a. The increase in gross investment will cause (Click to select) b. This will lead to (Click to select)in the price level and (Click to select) in real GDP IClick to select) fiscal policy will be used to (Click to select) C. d. The fiscal policy actions may include (Click to select) in taxes and/or [(Ciek to...
Suppose the federal government observes an increase in gross investment. Examine this event in terms of the aggregate demand and aggregate supply model. a. The increase in gross Investment will cause (Click to select) b. This will lead to Click to select) in the price level and Click to select) in real GDP c. (Click to select) fiscal policy will be used to Click to select) Click to select) d. The fiscal policy actions may include in taxes and/or Click...
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