Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy?
Use of discretionary policy to stabilize the economy
Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen economic fluctuations.
The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) For the economy in May 2020. According to the graph, this economy is in _______ .To bring the economy back to the natural level of output, the Federal Open Market Committee (FOMC) could use _______ monetary or fiscal policy such as _______
Shit the appropriate curve on the following graph to illustrate the effects of the policy you chose above.
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Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy?
Should the government use monetary and fiscal policy in an effort to stabilize the economy?
7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, and the pros and cons of using these tools to combat economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in April 2020. Suppose the government...
8. Using policy to stabilize the economy 8. Using policy to stabilize the economy The government...
8. Using policy to stabilize the economy
8. Using policy to stabilize the economy The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. Shifts in aggregate demand are often the result of waves of pessimism...
During a recession, economists traditionally focus on monetary and fiscal policies to bolster the economy. a. Use t...
During a recession, economists traditionally focus on monetary and fiscal policies to bolster the economy. a. Use the aggregate demand - aggregate supply (AD-AS) model in Panel A to show the effect of a tax cut, in the form of a tax rebate, given to each taxpayer. If inflation is high during a recession, some economists advocate cuts on marginal tax rates, to help avoid additional inflation. b. Use the AD-AS model in Panel B to show the effect of...
6. The long-run effects of monetary policy Aa Aa The following graphs show an economy that is cur...
6. The long-run effects of monetary policy The following graphs show an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run (LR) and short-run (SR) Phillips curves. The point on each graph shows the economy's current position. According to the graphs, potential output in this economy is _______ and the natural rate of unemployment is _______ .Suppose the central bank of the economy decreases the...
In classical theory, monetary policy A) is useful to stabilize the financial system B) is unnecessary...
In classical theory, monetary policy A) is useful to stabilize the financial system B) is unnecessary as the econony self-corrects to any shocks C) will increase aggregate supply in the short run. D) will not affect the aggregate demand curve.
a) Some economists claim that the government should always use monetary policy to stabilize (or target)...
a) Some economists claim that the government should always use monetary policy to stabilize (or target) the real interest rate in the short-run if they also wish to keep the resulting impact on (changes to) consumption to a minimum. Is this claim true, false or uncertain? Explain by using words and one IS/LM diagram. b) The government should always use monetary policy to combat the effect of business cycle fluctuations coming from changes in autonomous government spending on goods &...
In the economy depicted in the graph, what happens if there is no intervention from policy...
In the economy depicted in the graph, what happens if there is no intervention from policy makers? Use the graph, where LRAS represents long-run aggregate supply, SRAS represents short-run aggregate supply, and AD represents aggregate demand, to demonstrate the answers by shifting the appropriate curve or curves. LRAS SRAS Prices will Aggregate price level (P) decrease. O increase. Output will decrease. Real output (Q) O increase.
You've read how the Federal Reserve attempts to use the money supply to stabilize the economy. One criticism is that much of this policy is dependent on private banks to execute. What are the pro...
You've read how the Federal Reserve attempts to use the money supply to stabilize the economy. One criticism is that much of this policy is dependent on private banks to execute. What are the pros and cons if the Fed lent directly to households and small businesses? Is this a good idea?
You've read how the Federal Reserve attempts to use the money supply to stabilize the economy. One criticism is that much of this policy is dependent on private...
Suppose a closed economy is initially in the long run equilibrium. Suppose the monetary base of...
Suppose a closed economy is initially in the long run equilibrium. Suppose the monetary base of this economy is $100 million, of which people carry $10 million in form of currency/cash. 3. Assuming the banks keep a reserve ratio of 5%, what is the money supply in this economy? Suppose from now on that because of a virus, people become afraid of using currency and decide to deposit all the currency in banks, and carry money exclusively in the form...
Which of the following policy according to Keynes is best suited to stimulate an economy that...
Which of the following policy according to Keynes is
best suited to stimulate an economy that is experiencing a downturn
in the business cycle?
(a)A contractionary monetary policy
(b)A contractionary fiscal policy
(c)An expansionary fiscal policy
(d)An expansionary monetary policy
The vertical portion of the aggregate supply curve or AS curve
in Figure#1is:
(a)The long run supply curve
(b)The point of full employment GDP
(c)The point of full capacity utilization
(d)All of the above
Figure#1 AS Price Level AD5 PO...
8. Using policy to stabilize the economy
8. Using policy to stabilize the economy The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. Shifts in aggregate demand are often the result of waves of pessimism...
During a recession, economists traditionally focus on monetary and fiscal policies to bolster the economy. a. Use the aggregate demand - aggregate supply (AD-AS) model in Panel A to show the effect of a tax cut, in the form of a tax rebate, given to each taxpayer. If inflation is high during a recession, some economists advocate cuts on marginal tax rates, to help avoid additional inflation. b. Use the AD-AS model in Panel B to show the effect of...
In the economy depicted in the graph, what happens if there is no intervention from policy makers? Use the graph, where LRAS represents long-run aggregate supply, SRAS represents short-run aggregate supply, and AD represents aggregate demand, to demonstrate the answers by shifting the appropriate curve or curves. LRAS SRAS Prices will Aggregate price level (P) decrease. O increase. Output will decrease. Real output (Q) O increase.
You've read how the Federal Reserve attempts to use the money supply to stabilize the economy. One criticism is that much of this policy is dependent on private banks to execute. What are the pros and cons if the Fed lent directly to households and small businesses? Is this a good idea?
You've read how the Federal Reserve attempts to use the money supply to stabilize the economy. One criticism is that much of this policy is dependent on private...
Which of the following policy according to Keynes is
best suited to stimulate an economy that is experiencing a downturn
in the business cycle?
(a)A contractionary monetary policy
(b)A contractionary fiscal policy
(c)An expansionary fiscal policy
(d)An expansionary monetary policy
The vertical portion of the aggregate supply curve or AS curve
in Figure#1is:
(a)The long run supply curve
(b)The point of full employment GDP
(c)The point of full capacity utilization
(d)All of the above
Figure#1 AS Price Level AD5 PO...
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