During a recession, the most effective policies are expansionary fiscal policy and expansionary monetary policy. We know that fiscal policies are controlled by the government and they use the tools of government spending and taxations. On the other hand, monetary policies are controlled by central banks and they make changes in the money supply by making changes in the interest rates (interest rates are the rates at which money is lent).
Expansionary fiscal policy is effective at the time of recession and it involves increases in government spendings and a decrease in taxes. This stimulates the economy and gives a boost to its production, consumption, and growth. On the other hand, in an expansionary monetary fiscal policy that is controlled by the central bank, the interest rates are decreased, to increase the money supply in the economy. With lower interest rates, investments will be more, savings will be less and consumption will be more. Thus, an economy at a recession will get a boost.
When the country uses expansionary monetary and fiscal policies, there is an increase in the development of various sectors of the economy. Thus, these policies are most effective during the recession.
according to modern keynesians which of the following is an appropriate policy during a recession
On which of the following policies do Keynesians and monetarists agree? Fiscal policy is most effective in a very open economy. Monetary policy is less effective in a very open economy. Fiscal policy works directly through spending. Monetary policy works indirectly through spending.
According to activists, which of the following would be an appropriate monetary policy action for a period of unemployment? Select one: a. a reduction in government spending b. the purchase of government securities by the Fed c. an increase in the reserve requirement d. a reduction in the tax rate on personal income e. an increase in the discount rate
Budget deficit is appropriate during A. recession, but not inflation. B. inflation, but not recession. C. recession and inflation. D. neither recession nor inflation and why ?( pls explain)
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending! c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
Which of the following statements is correct? Select one: a. New Keynesians believe that the aggregate supply curve is vertical in the short run but not in the long run. b. Both new classicals and new Keynesians believe that the aggregate supply curve is vertical in the long run c. New Keynesians believe that the aggregate supply curve slopes upward in the long run. d. New classicals believe that the aggregate supply curve is a vertical line in both the...
Which of the following is true? A. During an economic recession and in a pessimistic environment, the yield spread beteen US government bonds and corporate bonds could be higher than during good economic times. B. During a period of economic growth and in an optimistic environmrnt, the yield spread between US government bonds and corporate bonds could be higher than during an economic recession and a pessimistic environment
Which of the following is not an idea the Fed uses to guide its modern use of nonconventional policy tools, according to class materials? The Fed doesn't want to overrely on one tool of policy. The Fed wants to change monetary variables in as small of increment as possible. O The Fed wants to use several different remedies to see which one works. The Fed needs to be flexible in its approach as situations change.
using examples explain how discretionary fiscal policy and automatic stabilizers work during periods of recession or inflation in the economy
During a recession, if a government uses an expansionary fiscal policy to increase GDP, the: Question 21 options: a) aggregate supply curve will shift to the right. b) aggregate supply curve will shift to the left. c) aggregate demand curve will shift to the left. d) aggregate demand curve will shift to the right. Suppose the government passes a new law that decreases tax rates. This policy is… Question 22 options: a) automatic and expansionary b) automatic and contractionary c)...