Homework Answers
"C"
As the investment has fell considerably this will reduce the demand in the market and shift the demand curve to the left, the Fiscal policy in the market should be directed to increase the demand and for that the government should decrease the tax rates.
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Assume the economy to be at full employment and that investment spending declines dramatically. Under these...
An economy is initially at full employment, but a decrease in planned investment spending (a comp...
An economy is initially at full employment, but a decrease in planned investment spending (a component of autonomous expenditure) pushes the economy into recession. Assume that the marginal propensity to consume (mpc) of this economy is 0.75 and that the multiplier is 4 a. How large is the recessionary gap after the fall in planned investment? The recessionary gap is times the size of the fall in planned investment. b. By how much would the government have to change its...
An economy is initially at full employment, but a decrease in planned investment spending (a component...
An economy is initially at full employment, but a decrease in planned investment spending (a component of autonomous expenditure) pushes the economy into recession. Assume that the mpc of this economy is 0.75 and that the multiplier is 4. LO4, L05) a. How large is the recessionary gap after the fall in planned investment? b. By how much would the government have to change its purchases to restore the economy to full employment? c. Alternatively, by how much would the...
1. If the economy is at full employment, increases in government spending: A) have a multiplier...
1. If the economy is at full employment, increases in government spending: A) have a multiplier effect on equilibrium output. B) have no effect on the aggregate price level. C) are primarily absorbed by price increases. D) reduce aggregate output. 2. Which of the following measures is NOT an example of discretionary fiscal policy? A) The unemployment compensation program pays out more money as unemployment rates rise. B) Tax rates are increased in the hope of slowing down the rate...
The graph shows an economy below full employment. To restore full employment, the government incr...
The graph shows an economy below full employment. To restore full employment, the government increases government expenditure by $0.5 trillion. Draw a curve to show the effect of the increase if it is the only change in spending plans. Label the curve ADo AE Price level (GDP price index, 2009-100) Potential GDP The increase 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,...
If the economy is close to full employment, an increase in government spending may increase GDP...
If the economy is close to full employment, an increase in government spending may increase GDP in the short run, but in the long run, this policy may: reduce investment in new capital. make domestic businesses less competitive in international markets if the dollar appreciates in value raise interest rates and reduce consumer expenditures on cars and new houses All of these options are correct Which of the following is considered contractionary fiscal policy? The government increases defense spending due...
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...
Assume that the economy is booming, consumer spending is excessive, so that there is risk of...
Assume that the economy is booming, consumer spending is excessive, so that there is risk of demand-pull inflation. Which of the following would be most in accord with appropriate government fiscal policy? Select one: a. finance budget deficit by printing new money b. an increase in Federal income tax rates and a cut in government spending c. an increase in the size of income tax exemptions for each dependent d. an increase in soil conservation subsidies to farmers and construction...
Please do all Thank you 7. Given the expected rate of return on all possible investment...
Please do all
Thank you
7. Given the expected rate of return on all possible investment opportunities in the economy, a(n) B. decrease in the real rate of interest will tend to increase the level of investment. C. decrea A. increase in the real rate of interest will tend to increase the level of investment. se in the real rate of interest will tend to decrease the level of investment. D. change in the real interest rate will have no...
[11] If an economy were to pursue a policy of maintaining full employment, it would likely...
[11] If an economy were to pursue a policy of maintaining full employment, it would likely have to forgo: A) price stability. B) full production. C) economic growth. D) maximum current output. [11A] When the inflation rate goes up, the purchasing power of money: A) increases. B) decreases. C) remains unchanged. D) remains unchanged at first and then increases. [11B] An increase in productivity occurs when: A) output per worker increases. B) a nation's rate of inflation falls. C) money...
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a....
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...
An economy is initially at full employment, but a decrease in planned investment spending (a component of autonomous expenditure) pushes the economy into recession. Assume that the marginal propensity to consume (mpc) of this economy is 0.75 and that the multiplier is 4 a. How large is the recessionary gap after the fall in planned investment? The recessionary gap is times the size of the fall in planned investment. b. By how much would the government have to change its...
An economy is initially at full employment, but a decrease in planned investment spending (a component of autonomous expenditure) pushes the economy into recession. Assume that the mpc of this economy is 0.75 and that the multiplier is 4. LO4, L05) a. How large is the recessionary gap after the fall in planned investment? b. By how much would the government have to change its purchases to restore the economy to full employment? c. Alternatively, by how much would the...
1. If the economy is at full employment, increases in government spending: A) have a multiplier effect on equilibrium output. B) have no effect on the aggregate price level. C) are primarily absorbed by price increases. D) reduce aggregate output. 2. Which of the following measures is NOT an example of discretionary fiscal policy? A) The unemployment compensation program pays out more money as unemployment rates rise. B) Tax rates are increased in the hope of slowing down the rate...
The graph shows an economy below full employment. To restore full employment, the government increases government expenditure by $0.5 trillion. Draw a curve to show the effect of the increase if it is the only change in spending plans. Label the curve ADo AE Price level (GDP price index, 2009-100) Potential GDP The increase 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,...
If the economy is close to full employment, an increase in government spending may increase GDP in the short run, but in the long run, this policy may: reduce investment in new capital. make domestic businesses less competitive in international markets if the dollar appreciates in value raise interest rates and reduce consumer expenditures on cars and new houses All of these options are correct Which of the following is considered contractionary fiscal policy? The government increases defense spending due...
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...
Please do all
Thank you
7. Given the expected rate of return on all possible investment opportunities in the economy, a(n) B. decrease in the real rate of interest will tend to increase the level of investment. C. decrea A. increase in the real rate of interest will tend to increase the level of investment. se in the real rate of interest will tend to decrease the level of investment. D. change in the real interest rate will have no...
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...
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