39. Illustrate (by using an AD-AS model) and explain a situation in which an expansionary fiscal...
39. Illustrate (by using an AD-AS model) and explain a situation in which an expansionary fiscal policy (increase in G) only produces inflation
Homework Answers
In classical model, when aggregate supply curve is vertical then expansionary fiscal policy due to an increase in G will shift the aggregate demand curve to the right. With vertical aggregate supply curve and expansionary fiscal policy, aggregate demand curve shift rightward which leads to only an increase in inflation and no increase in output.
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39. Illustrate (by using an AD-AS model) and explain a
situation in which an expansionary fiscal...
Figure: Effects of Contractionary Fiscal Policies LRAS SRAS AD Aggregate Output (Q) ot t Expansionary fiscal...
Figure: Effects of Contractionary Fiscal Policies LRAS SRAS AD Aggregate Output (Q) ot t Expansionary fiscal policy should be used to ensure a higher price level Contractionary fiscal policies should be used to reduce inflation Contractionary fiscal policy should be used to ensure a higher price level Expansionary fiscal policy should be used to increase aggregate demand Which of the following statements is true regarding the diagram above
2. (12 marks) Use a AD/AS diagram to illustrate the use of expansionary monetary policy to...
2. (12 marks) Use a AD/AS diagram to illustrate the use of expansionary monetary policy to close an expansionary gap. a. Label the axes. b. Label the lines. And show c. Show the new AD line after the expansionary monetary policy is applied. d. Briefly explain what your diagram shows. e. Explain what monetary policies impact. the expansionary gap with the LRAS. RAS SRAS
2. (12 marks) Use a AD/AS diagram to illustrate the use of expansionary monetary policy to...
2. (12 marks) Use a AD/AS diagram to illustrate the use of expansionary monetary policy to close an expansionary gap. a. Label the axes. b. Label the lines. And show the expansionary gap with the LRAS c. Show the new AD line after the expansionary monetary policy is applied. d. Briefly explain what your diagram shows. e. Explain what monetary policies impact. LRAS SRAS Poh t AD2 recessiona
Define the following: AD function with G & T Disposable income (Yd) Fiscal policy...
Define the following: AD function with G & T Disposable income (Yd) Fiscal policy – expansionary & contractionary AD model impacts of fiscal policies Spending, Tax, and Balanced Budget Multipliers Automatic stabilizers Discretionary policy Deficit, Surplus (Budget)
Define the following: AD function with G & T Disposable income (Yd) Fiscal policy – expans...
Define the following: AD function with G & T Disposable income (Yd) Fiscal policy – expansionary & contractionary AD model impacts of fiscal policies Spending, Tax, and Balanced Budget Multipliers Automatic stabilizers Discretionary policy Deficit, Surplus (Budget)
IS-LM-FX Model and Stabilization Policy Suppose the fiscal authority of an economy implements expansionary policy. Specifically,...
IS-LM-FX Model and Stabilization Policy Suppose the fiscal authority of an economy implements expansionary policy. Specifically, the government increases its spending. Consider the graphical illustration of the IS-LM-FX model and the analysis of the policy change, and answer the following questions comparing the initial equilibrium before any change was implemented to the equilibrium that prevails after the expansionary fiscal policy is implemented. a) What happens to the consumer spending, why? explain. b) What happens to the investment spending, why? explain....
According to the Crowding out theory, if the government engages in expansionary fiscal policy, which of...
According to the Crowding out theory, if the government engages in expansionary fiscal policy, which of the following will take place? an increase in the deficit, an increase in demand for loanable funds, an increase in interest rates and a decrease in AD an increase in the deficit, an increase in demand for loanable funds, a decrease in interest rates and a decrease in AD an increase in the deficit, a decrease in demand for loanable funds, a decrease interest...
In the Keynesian model, the difference between using monetary and fiscal policy to eliminate a recession...
In the Keynesian model, the difference between using monetary and fiscal policy to eliminate a recession is that________. an expansionary fiscal policy will leave the economy with a lower real interest rate than an expansionary monetary policy. fiscal policy will eliminate a recession quicker than monetary policy will. monetary policy will eliminate a recession quicker than fiscal policy will. an expansionary monetary policy will leave the economy with a lower real interest rate than an expansionary fiscal policy.
2. Explain transition mechanism for the expansionary monetary policy by using florigen exchange market, bond market,...
2. Explain transition mechanism for the expansionary monetary policy by using florigen exchange market, bond market, market of money, and AS-Ad model.
Explain how expansionary fiscal policy (fiscal stimulus) sometimes crowd out investment.
Explain how expansionary fiscal policy (fiscal stimulus) sometimes crowd out investment.
Figure: Effects of Contractionary Fiscal Policies LRAS SRAS AD Aggregate Output (Q) ot t Expansionary fiscal policy should be used to ensure a higher price level Contractionary fiscal policies should be used to reduce inflation Contractionary fiscal policy should be used to ensure a higher price level Expansionary fiscal policy should be used to increase aggregate demand Which of the following statements is true regarding the diagram above
2. (12 marks) Use a AD/AS diagram to illustrate the use of expansionary monetary policy to close an expansionary gap. a. Label the axes. b. Label the lines. And show c. Show the new AD line after the expansionary monetary policy is applied. d. Briefly explain what your diagram shows. e. Explain what monetary policies impact. the expansionary gap with the LRAS. RAS SRAS
2. (12 marks) Use a AD/AS diagram to illustrate the use of expansionary monetary policy to close an expansionary gap. a. Label the axes. b. Label the lines. And show the expansionary gap with the LRAS c. Show the new AD line after the expansionary monetary policy is applied. d. Briefly explain what your diagram shows. e. Explain what monetary policies impact. LRAS SRAS Poh t AD2 recessiona
According to the Crowding out theory, if the government engages in expansionary fiscal policy, which of the following will take place? an increase in the deficit, an increase in demand for loanable funds, an increase in interest rates and a decrease in AD an increase in the deficit, an increase in demand for loanable funds, a decrease in interest rates and a decrease in AD an increase in the deficit, a decrease in demand for loanable funds, a decrease interest...
2. Explain transition mechanism for the expansionary monetary policy by using florigen exchange market, bond market, market of money, and AS-Ad model.
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