Homework Answers
Correct option is (2).
Expansionary fiscal policy involves increasing government spending or decreasing taxes, which increases budget deficit. To finance this, government borrows more, which increases interest rate. Higher interest rate lowers investment, which decreases aggregate demand and weakens the effects of the Expansionary fiscal policy.
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Question 17 1 pts According to the Keynesian approach to fiscal policy The crowding out effect...
A. If there is complete crowding out as a result of an increase in government spending...
A. If there is complete crowding out as a result of an increase in government spending there will be a decrease in aggregate demand. no change in aggregate demand. an increase in aggregate demand. a downward movement along the aggregate demand curve. B. According to Buchanan and Wagner, why is there a political bias toward expansionary fiscal policy rather than contractionary fiscal policy? In a democracy, expansionary fiscal policy prescriptions are more politically popular than are the policy prescriptions associated...
The crowding-out from expansionary fiscal policy causes real interest rates to (increase/decrease) investment to (decrease/increase) , and...
The crowding-out from expansionary fiscal policy causes real interest rates to (increase/decrease) investment to (decrease/increase) , and aggregate demand to shift (left/right),(decreasing/increasing) the overall impact of expansionary economic policy.
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...
1.b. Fiscal policy is said to suffer from ‘crowding out’. Explain what this means and why...
1.b. Fiscal policy is said to suffer from ‘crowding out’. Explain what this means and why it is a problem. Should the Federal budget always be balanced? 2. a. Describe the main goals of monetary policy and explain how a change in interest rates can affect the different categories of aggregate demand. (5 marks) b. You are the Reserve Bank Governor and are reviewing the following economic data: Real GDP growth rate: 4.2% Unemployment rate: 4.6% Inflation rate: 3.8% Determine...
Question 52 (1 point) Crowding out makes fiscal policy more complicated to formulate because it can...
Question 52 (1 point) Crowding out makes fiscal policy more complicated to formulate because it can the theoretical magnitude of the A) reduce; interest rate B) increase; multiplier effect C) increase; interest rate D) reduce; multiplier effect Question 54 (1 point) An increase in aggregate demand in the short-run means OA) the real GDP would increase and rises in the price level would become smaller B) the real GDP would decrease and the price level would rise OC) both the...
Question 6 0.2 pts The effectiveness of expansionary fiscal policy is limited when which of the...
Question 6 0.2 pts The effectiveness of expansionary fiscal policy is limited when which of the following occurs? Continual budget deficits leading to high public debt. Continual budget deficits leading to low public debt. Temporary budget deficits leading to high public debt. Temporary budget deficits leading to low public debt. Continual budget surpluses leading to high public debt.
Module 7 Ch.17 Fiscal Policy and AD-AS Graph (4 points on each scenario) This problem is...
Module 7 Ch.17 Fiscal Policy and AD-AS Graph (4 points on each scenario) This problem is adapted and modified from Openstax Ch.17 problem 53. Review ch.11 to 13 about AS-AD, Keynesian, and Neoclassical approaches. 1. Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below, and explain why. (2 points) 2. Sketch an AD-AS diagram for each of the situations. Your graph should include the vertical potential GDP, and...
23. Suppose a government finances its expansionary fiscal policy by borrowing from the public. Joseph is...
23. Suppose a government finances its expansionary fiscal policy by borrowing from the public. Joseph is concerned that this will increase the demand for loanable funds, drive up interest rates, and leave less loanable money available for consumers and businesses. Joseph is concerned about the: A) boomerang effect. B) expansionary countereffect. C) ricochet effect. D) crowding-out effect. 24. Suppose the economy is growing at 4% a year, inflation is measured at 0.5% a year, and the federal deficit is relatively...
Question 4 Discuss the following statements: (a) According to the IS-LM model how would an increase...
Question 4 Discuss the following statements: (a) According to the IS-LM model how would an increase of government spending affect equilibrium interest rates and income in a short-run closed macroeconomy. (b) According to the Classical Model of the aggregate economy, changes in aggregate demand have no effect on the amount of output produced, only the average pricelevel may be affected. (c) Crowding out through interest rates occurs when expansionary fiscal pol-icy causes interest rates to fall. (d) The relative bargaining...
Q1. What are the “automatic” and “discretionary” aspects of fiscal policy and how do they fit...
Q1. What are the “automatic” and “discretionary” aspects of fiscal policy and how do they fit Keynesian fiscal policy to stimulate the economy in a recession, in terms of Government spending, taxation and budget deficits in a Demand driven economy. Q2. Use the consumption function model to explain the impact of government spending using the concepts of the Paradox of Thrift, the Multiplier effect and the role of Expectations (Consumer Confidence.) Q3. Explain two arguments against Keynesian fiscal policy, one...
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...
Question 52 (1 point) Crowding out makes fiscal policy more complicated to formulate because it can the theoretical magnitude of the A) reduce; interest rate B) increase; multiplier effect C) increase; interest rate D) reduce; multiplier effect Question 54 (1 point) An increase in aggregate demand in the short-run means OA) the real GDP would increase and rises in the price level would become smaller B) the real GDP would decrease and the price level would rise OC) both the...
Question 6 0.2 pts The effectiveness of expansionary fiscal policy is limited when which of the following occurs? Continual budget deficits leading to high public debt. Continual budget deficits leading to low public debt. Temporary budget deficits leading to high public debt. Temporary budget deficits leading to low public debt. Continual budget surpluses leading to high public debt.
Module 7 Ch.17 Fiscal Policy and AD-AS Graph (4 points on each scenario) This problem is adapted and modified from Openstax Ch.17 problem 53. Review ch.11 to 13 about AS-AD, Keynesian, and Neoclassical approaches. 1. Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below, and explain why. (2 points) 2. Sketch an AD-AS diagram for each of the situations. Your graph should include the vertical potential GDP, and...
23. Suppose a government finances its expansionary fiscal policy by borrowing from the public. Joseph is concerned that this will increase the demand for loanable funds, drive up interest rates, and leave less loanable money available for consumers and businesses. Joseph is concerned about the: A) boomerang effect. B) expansionary countereffect. C) ricochet effect. D) crowding-out effect. 24. Suppose the economy is growing at 4% a year, inflation is measured at 0.5% a year, and the federal deficit is relatively...
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