Homework Answers
Due to presence of HOMEWORKLIB POLICY, I am answering first question.
1.
Ans:
Explanation:
Only disadvantage of inflationary gap is inflation which hurts consumers. The advantage of using contractionary policy is that it will dampen inflationary pressures faster than natural process.
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Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather...
a Suppose the Canadian economy is in inflationary gap. Explain how fiscal policy is used by...
a Suppose the Canadian economy is in inflationary gap. Explain how fiscal policy is used by the government to close the gap. Explain all the steps. b. How a government can reduce consumption expenditure? How decrease in consumption expenditure will affect economy with inflationary gap.
2. Suppose the Canadian economy is in inflationary gap. Explain how fiscal policy is used by...
2. Suppose the Canadian economy is in inflationary gap. Explain how fiscal policy is used by the government to close the gap. Explain all the steps. b. How a government can reduce consumption expenditure? How decrease in consumption expenditure will affect economy with inflationary gap.
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as...
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as being 10% when in fact it was 12%, it might cause O A. consumers to spend more than they intended, because the Bank of Canada misled them about the unemployment rate. O B. a reduction in the natural rate of unemployment, because it would be allowing inflation to occur. O c. a one-time reduction in unemployment, because of a one-time increase in the money...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate price level LRAS SRAS Real GDP Potential —YpY output To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap? The central bank can use contractionary monetary policy. The interest rate will rise, which would encourage a...
3.The Multiplier and returning the economy to Equilibrium a. List expansionary and contractionary tools of fiscal...
3.The Multiplier and returning the economy to Equilibrium a. List expansionary and contractionary tools of fiscal policy b. Assume C=$12,300 +.6 Dl and graph an economy in the AD AS model with Potential Output of $600 and Real GDP at $450. Identify typical levels of unemployment and inventory change in this gap. c. Calculate the change in unemployment insurance needed to close the gap. Show all work d. Assume government spending changes by $50, what is the impact on AD?
What fiscal policy would you recommend to eliminate the inflationary or recessionary gap in the following...
What fiscal policy would you recommend to eliminate the inflationary or recessionary gap in the following scenarios: Real GDP $44,500; potential GDP $46,200; mpe 0.2. O A. If the mpe is 0.2, the multiplier is 1.25. Because there is a recessionary gap of $1,700, the government should increase expenditures by $1,360 or decrease taxes by $6,800. O B. If the mpe is 0.2, the multiplier is 1.25. Because there is an inflatonary gap of $1,700, the government should decrease expenditures...
The graph shows an economy that is above full employment. To restore full employment, the government...
The graph shows an economy that is above full employment. To restore full employment, the government decreases government expenditure by $0.5 trillion. Draw a curve to show the effect of the decrease if this is the only change in spending plans. Label the curve AD0-ΔE The decrease in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD Draw a point at the full-employment equilibrium...
In the graph, the initial aggregate supply curve is AS and the initial aggregate demand curve...
In the graph, the initial aggregate supply curve is AS and the initial aggregate demand curve is ADo Some events that could have changed aggregate demand from AD, to AD are O A. a fall in the exchange rate or Price level 0 AS AS an increase in expected future inflation O B. a decrease in the money wage rate or 105 10 an increase in potential GDP ( 100 C. a decrease in expected future income or a decrease...
10. The output gap in this video would be the same thing as Optional Answers: 1....
10. The output gap in this video would be the same thing as Optional Answers: 1. inflationary or recessionary gap in the book 2. When firms are not using the correct resources to produce goods and services 3. a decrease in cyclical unemployment 4. a change in price level 11. A contraction in the economy is defined as Optional Answers: 1. a decrease in Real GDP 2. a decrease in unemployment
Inflationary pressure in the AS-AD model can be shown as a leftward shift of the AD...
Inflationary pressure in the AS-AD model can be shown as a leftward shift of the AD curve when the economy is already producing at its potential GDP. supply shock that shifts the AS to the right. rightward shift of the AD curve when the economy is already producing at its potential GDP. Typically, if consumer and business confidence is high then ________ and if consumer and business confidence is low then ________. AD shifts to the left; AD shifts to...
a Suppose the Canadian economy is in inflationary gap. Explain how fiscal policy is used by the government to close the gap. Explain all the steps. b. How a government can reduce consumption expenditure? How decrease in consumption expenditure will affect economy with inflationary gap.
2. Suppose the Canadian economy is in inflationary gap. Explain how fiscal policy is used by the government to close the gap. Explain all the steps. b. How a government can reduce consumption expenditure? How decrease in consumption expenditure will affect economy with inflationary gap.
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as being 10% when in fact it was 12%, it might cause O A. consumers to spend more than they intended, because the Bank of Canada misled them about the unemployment rate. O B. a reduction in the natural rate of unemployment, because it would be allowing inflation to occur. O c. a one-time reduction in unemployment, because of a one-time increase in the money...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate price level LRAS SRAS Real GDP Potential —YpY output To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap? The central bank can use contractionary monetary policy. The interest rate will rise, which would encourage a...
3.The Multiplier and returning the economy to Equilibrium a. List expansionary and contractionary tools of fiscal policy b. Assume C=$12,300 +.6 Dl and graph an economy in the AD AS model with Potential Output of $600 and Real GDP at $450. Identify typical levels of unemployment and inventory change in this gap. c. Calculate the change in unemployment insurance needed to close the gap. Show all work d. Assume government spending changes by $50, what is the impact on AD?
What fiscal policy would you recommend to eliminate the inflationary or recessionary gap in the following scenarios: Real GDP $44,500; potential GDP $46,200; mpe 0.2. O A. If the mpe is 0.2, the multiplier is 1.25. Because there is a recessionary gap of $1,700, the government should increase expenditures by $1,360 or decrease taxes by $6,800. O B. If the mpe is 0.2, the multiplier is 1.25. Because there is an inflatonary gap of $1,700, the government should decrease expenditures...
The graph shows an economy that is above full employment. To restore full employment, the government decreases government expenditure by $0.5 trillion. Draw a curve to show the effect of the decrease if this is the only change in spending plans. Label the curve AD0-ΔE The decrease in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD Draw a point at the full-employment equilibrium...
In the graph, the initial aggregate supply curve is AS and the initial aggregate demand curve is ADo Some events that could have changed aggregate demand from AD, to AD are O A. a fall in the exchange rate or Price level 0 AS AS an increase in expected future inflation O B. a decrease in the money wage rate or 105 10 an increase in potential GDP ( 100 C. a decrease in expected future income or a decrease...
10. The output gap in this video would be the same thing as Optional Answers: 1. inflationary or recessionary gap in the book 2. When firms are not using the correct resources to produce goods and services 3. a decrease in cyclical unemployment 4. a change in price level 11. A contraction in the economy is defined as Optional Answers: 1. a decrease in Real GDP 2. a decrease in unemployment
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