ZuoTi.Pro
Question

1. Which one of the following is not an example of expansionary fiscal policy? a. Increasing...

1. Which one of the following is not an example of expansionary fiscal policy?

a. Increasing government spending on unemployment insurance
b. Decreasing government spending on education
c. Decreasing federal income tax rates
d. Increasing government spending on the military
e. Decreasing local property taxes

2. In recessions, tax revenues tend to decline and transfer payments like unemployment insurance and food stamps tend to increase, so these programs...

a. increase unemployment.
b. create budget surpluses during economic downturns.
c. are procyclical.
d. None of the above
e. are automatic stabilizers.

3. Suppose that the behavior of households and firms in an economy is determined by the following equations

C=25+0.9Yd, II = 60, G = 80, T = 60, TR=10.

a. Calculate an expression for aggregate demand as a function of income (please enter your answer in the form: AD = a + bY).

b. Calculate the equilibrium level of output (please just enter the numeric value of output). Y=

c. Now assume that the government decides to simultaneously increase government spending and taxes by 50 (G'=130 and T'=110). Calculate the new expression for aggregate demand.

d. Calculate the new equilibrium level of output. Y'=

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

Homework Answers

Answer #1

1. b. Decreasing government spending on education
(Expansionary fiscal policy means increasing government spending or reducing taxes.)

2. e. are automatic stabilizers.
(During recessions these changes act as automatic stabilizers.)

3.
a. Yd = Y - T + TR = Y - 60 + 10 = Y - 50
So, C = 25 + 0.9(Y-50) = 25 + 0.9Y - 45 = -20 + 0.9Y
AD = C + II + G = -20 + 0.9Y + 60 + 80 = 120 + 0.9Y
So, AD = 120 + 0.9Y

b. At equilibrium, Y = AD
So, Y = 120 + 0.9Y
So, Y - 0.9Y = 0.8Y = 120
So, Y = 120/0.8
So, Y = 150

c. Yd = Y - T + TR = Y - 110 + 10 = Y - 100
So, C = 25 + 0.9(Y-100) = 25 + 0.9Y - 90 = -65 + 0.9Y
AD = C + II + G = -65 + 0.9Y + 60 + 130 = 125 + 0.9Y
So, AD = 125 + 0.9Y

d. At equilibrium, Y = AD
So, Y = 125 + 0.9Y
So, Y - 0.9Y = 0.8Y = 125
So, Y = 125/0.8
So, Y = 156.25

0 0
Add a comment
Know the answer?
Add Answer to:
1. Which one of the following is not an example of expansionary fiscal policy? a. Increasing...
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

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1. When countries have severe debt problems: fiscal policy is an especially good idea. expansionary fiscal...

    1. When countries have severe debt problems: fiscal policy is an especially good idea. expansionary fiscal policy can reduce real growth. it makes no difference for fiscal policy. they can continue to borrow forever without any adverse consequences. 2. Increases in government spending financed through additional borrowing will typically: lead to higher taxes. lead to higher interest rates. stimulate both consumption and investment. provide more stimulus than when government spending is financed through higher taxes. 3. In a recession, automatic...

  • 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...

  • Classify each statement as an example of expansionary fiscal policy, contractionary fiscal policy, or not an...

    Classify each statement as an example of expansionary fiscal policy, contractionary fiscal policy, or not an example of fiscal policy. Expansionary fiscal policy Contractionary fiscal policy Not an example of fiscal policy Answer Bank a decrease in government spending an increase in corporate bonds purchased a decrease in transfer payments a decrease in the money supply a decrease in taxes an increase in the money supply a decrease in the unemployment rate an increase in tax rates an increase in...

  • Which of the following is an example of an expansionary fiscal policy? a. The US government increasing corporate taxes b...

    Which of the following is an example of an expansionary fiscal policy? a. The US government increasing corporate taxes b. The US government lowering spending in order to balance the budget c. The US government lowering corporate and individual taxes d. The Fed lowering interest rates Which of the following is an example of contractionary monetary policy? a. The Fed conducting open market purchase b. The Fed conducting open market sale c. The US government increases taxes d. The Fed...

  • FISCAL POLICY IN-CLASS WORKSHEET 2 This question explores the role of expansionary and contractionary fiscal policy...

    FISCAL POLICY IN-CLASS WORKSHEET 2 This question explores the role of expansionary and contractionary fiscal policy in the Aggregate Demand and Aggregate Supply model. You will use schedules for an aggregate demand line and an aggregate supply line to identify the equilibrium price level and real GDP in a macroeconomy. Additionally, you will compare the short-run equilibrium level of real GDP to the full employment level of real GDP to identify desirable fiscal policies. Below, you are provided the schedules...

  • (6) Imagine that the economy is in a recession. Which one of the following tactics is...

    (6) Imagine that the economy is in a recession. Which one of the following tactics is a way to increase output by shifting aggregate demand outward? Raising taxes to increase the government surplus Increasing government spending Increasing the required reserve ratio Imposing tariffs on foreign goods          (7) In the short run, supply shocks cause prices to __________ and the quantity demanded to __________. increase; increase increase; decrease decrease; increase decrease; decrease          (8) Good deflation...

  • QUESTION 1 Which of the following is an example of an automatic fiscal policy stabilizer? a....

    QUESTION 1 Which of the following is an example of an automatic fiscal policy stabilizer? a. Tax revenues fall as real GDP decreases. b. Congress decides to cut spending on national defense. c. Congress cuts individual income tax rates. d. Tax revenues rise after Congress raises corporate tax rates. QUESTION 7 When a country's economy is producing at a level that is less than its potential GDP, the standardized employment deficit will show a ________ than the actual deficit. a....

  • 1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision...

    1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at ful employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is very low B) the money demand will shift...

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

    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.

  • Question 4 Which factor is an expansionary fiscal policy? A. an increase in taxes that reduces...

    Question 4 Which factor is an expansionary fiscal policy? A. an increase in taxes that reduces the budget deficit and decreases consumption B. a decrease in government spending C. an increase in unemployment benefits D. an increase in the money supply that decreases interest rates > Moving to another question will save this response.

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