ZuoTi.Pro
Question

Estimating the Effect of Fiscal Policy on Output Suppose an economist finds that government spending is...

Estimating the Effect of Fiscal Policy on Output

Suppose an economist finds that government spending is negatively correlated with output growth. That is, in periods in which government spending is greater than normal that output growth is, on average, relatively low and in periods in which government spending is less than normal that output growth is, on average, relatively high. Should we take this as evidence against a Keynesian model in which an increase in government spending leads to an increase in output? Explain your answer.

Please provide a very detailed response

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Request Professional Answer

Request Answer!

We need at least 9 more requests to produce the answer.

1 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Estimating the Effect of Fiscal Policy on Output Suppose an economist finds that government spending is...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • Explain how fiscal policy (government spending and taxes) and monetary policy (determining interest rates) affect the...

    Explain how fiscal policy (government spending and taxes) and monetary policy (determining interest rates) affect the level of output and employment in the economy according to Keynesian theory. What fiscal and monetary policies should the government follow to pull the economy out of a recession?

  • Compare the effects of an expansionary fiscal policy action—an increase in government spending financed by government...

    Compare the effects of an expansionary fiscal policy action—an increase in government spending financed by government bond sales to the public, for example—in the Keynesian and classical models. Include in your answer the effects of this policy shift on the level of real income, employment, the price level, and the rate of interest.

  • (1) Which of the following is not a tool of fiscal policy? Government spending Taxes Tax...

    (1) Which of the following is not a tool of fiscal policy? Government spending Taxes Tax incentives Private investment          (2) Which of the following statements helps to explain why the economy can be slow to recover from a recession? Workers are less motivated because of reduced expectations, which reduces total output. There is not as much money in circulation to fuel new investment. Wages do not fall quickly, which delays an adjustment to a higher output level....

  • 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...

  • 49. Suppose now that the government decides to use fiscal policy to ameliorate the effect of...

    49. Suppose now that the government decides to use fiscal policy to ameliorate the effect of the negative shock on investment. Use the model of aggregate demand and aggregate supply provided below to illustrate graphically what the government can do to respond to the sudden decrease in investment, and what the impact of government action will be, in the long-run, on prices and output. You must explain each step of the process. Price level 1 Quantity of Output a) Decrease...

  • LRAS SRAS GDP Price Defle or Real GDP Inflation is on the Y-Axis and Output is...

    LRAS SRAS GDP Price Defle or Real GDP Inflation is on the Y-Axis and Output is on the X-Axis. A Keynesian economist would advise which fiscal policy? O decrease imported goods increase nominal interest rates decreased government spending increased government spending

  • Fiscal Policy: Government can control the economy in a big way by adjusting its expenditure. The...

    Fiscal Policy: Government can control the economy in a big way by adjusting its expenditure. The group of mechanisms using expenditure form the fiscal policy. When government spends more it can lead to more demand and that means more price increase. This means both high growth and high inflation. And it works in the reverse too. Thus, governments try to spend more during periods of low growth & low inflation and cut spending during periods of high growth & high...

  • Question 54 Supply-side fiscal policy focuses on: increases in government spending that lead to multiple increases...

    Question 54 Supply-side fiscal policy focuses on: increases in government spending that lead to multiple increases in equilibrium income and output. decreases in government spending and taxing in order to decrease the impact of government on the supply-side of the economy. decreases in marginal tax rates designed to increase incentives to work and produce. increases in tax rates designed to increase government revenue, which will enable government to supply more social programs.

  • Q2. In the Keynesian cross model, equilibrium in the economy is obtained where planned spending equals...

    Q2. In the Keynesian cross model, equilibrium in the economy is obtained where planned spending equals actual spending. (a) Explain what planned spending and actual spending are (b) Graphically present the equilibrium condition of the economy in the Keynesian cross model. (c) Explain how the economy adjusts to equilibrium if the economy finds itself with a level of planned spending which is less than actual spending (3 marks) (d) Explain why an increase in government spending leads to a greater...

  • 1.In the neoclassical view of the economy, expansionary fiscal policy cannot work to raise equilibrium output...

    1.In the neoclassical view of the economy, expansionary fiscal policy cannot work to raise equilibrium output because it will raise unemployment. it will disincentivize production. flexible prices will eventually choke off any increase in aggregate demand. 2.Autonomous expenditure does NOT depend on what factor? Consumer spending Future expectations GDP/output 3. Each of the following statements are about government spending as function of national income. Which one of the statements is a false statement? On a Keynesian cross diagram the government...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT