Deficit spending will not cause much inflation if the economy is operating near full employment. a....
Deficit spending will not cause much inflation if the economy is operating near full employment.
|
a. |
True |
|
|
b. |
False |
Homework Answers
Increase in aggregate demand results in an increase in price level or inflation.
When economy is operating far from full employment then increase in aggregate demand results in lesser increase in price level relative to when economy is operating near full employment.
This is because when economy is operating far from full employment, idle capacity in the economy is greater resulting in greater increase in aggregate supply as aggregate demand increases resulting in lesser increase in price level or inflation.
However, when economy is operating near the full employment, idle capacity in the economy is smaller resulting in smaller increase in aggregate supply as aggregate demand increases resulting in greater increase in price level or inflation.
Deficit spending results in an increase in aggregate demand.
So, deficit spending will cause much inflation if the economy is operating near full employment.
Hence, the given statement is False.
Add Answer to:
Deficit spending will not cause much inflation if the economy is
operating near full employment.
a....
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...
Which of the following can cause demand-pull inflation if the economy is currently in equilibrium at full-employment GDP?
Which of the following can cause demand-pull inflation if the economy is currently in equilibrium at full-employment GDP? An increase in the labour participation rate A reduction in government spending A decrease in real wages An increase in net exports An increase in the company income tax rate.
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...
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...
a Look at the information provided: The economy is at full employment, the inflation rate is...
a Look at the information provided: The economy is at full employment, the inflation rate is What would be the long-run effects of new government infrastructure expenditure? 2 percent a year, and the federal budget deficit is The long-run effects of new infrastructure expenditure are 3.5 percent of GDP. rate and in potential GDP. Congress wants to make real GDP grow faster and is debating whether to spend O A. rise in the interest; an increase more on infrastructure or...
Assume the economy to be at full employment and that investment spending declines dramatically. Under these...
Assume the economy to be at full employment and that investment spending declines dramatically. Under these conditions fiscal policy should be directed toward: O a decrease in government spending. an increase the money supply. a decrease in tax rates. O an increase in tax rates.
4)If the economy is at full employment, a rise in net exports causes: A) An increase...
4)If the economy is at full employment, a rise in net exports causes: A) An increase in RGDP, no change in price in the AD/AS graph. B) Increase in prices in the AD/AS model with no change in the Keynesian model C) Increase in price, no change in RGDP in the Keynesian model D)Increase in RGDP and price level in both models. E) Increases RGDP and prices in Keynesian 5) What describes the difference between Keynesian and classical thinking? A)...
8. Suppose an economy is in full employment when income is $8,000 million. Currently, their income...
8. Suppose an economy is in full employment when income is $8,000 million. Currently, their income is $8,434 million. The spending multiplier is 2.8 and the tax multiplier is 2.0. (3 pts.) a. Is the economy in a recessionary or inflationary period? b. Suppose the government wants to increase interest rates to give an incentive to businesses to change how much they invest. How much will investments need to change for the economy to reach full employment? c. Suppose the...
If an economy is operating at the natural rate of unemployment, it is OA) experiencing inflation....
If an economy is operating at the natural rate of unemployment, it is OA) experiencing inflation. B) in a recession. OC) producing at its full employment real GDP. D) in an expansion.
Monetarists and classical economists: a. assume that the economy operates at full employment and stimulative monetary...
Monetarists and classical economists: a. assume that the economy operates at full employment and stimulative monetary policy will increase both aggregate supply and aggregate demand. b. assume the economy operates at full employment and stimulative monetary policy will only cause the price level to rise. c. assume that stimulative monetary policy will create high levels of GDP without inflation. d. assume that stimulative monetary policy will create high levels of GDP and slightly high prices.
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...
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...
a Look at the information provided: The economy is at full employment, the inflation rate is What would be the long-run effects of new government infrastructure expenditure? 2 percent a year, and the federal budget deficit is The long-run effects of new infrastructure expenditure are 3.5 percent of GDP. rate and in potential GDP. Congress wants to make real GDP grow faster and is debating whether to spend O A. rise in the interest; an increase more on infrastructure or...
Assume the economy to be at full employment and that investment spending declines dramatically. Under these conditions fiscal policy should be directed toward: O a decrease in government spending. an increase the money supply. a decrease in tax rates. O an increase in tax rates.
8. Suppose an economy is in full employment when income is $8,000 million. Currently, their income is $8,434 million. The spending multiplier is 2.8 and the tax multiplier is 2.0. (3 pts.) a. Is the economy in a recessionary or inflationary period? b. Suppose the government wants to increase interest rates to give an incentive to businesses to change how much they invest. How much will investments need to change for the economy to reach full employment? c. Suppose the...
If an economy is operating at the natural rate of unemployment, it is OA) experiencing inflation. B) in a recession. OC) producing at its full employment real GDP. D) in an expansion.
Most questions answered within 3 hours.
-
find the critical value associated with a right sided hypothesis of
the mean using a sample...
asked 49 minutes ago -
Which of the following statements is true with respect to a
simple linear regression model?
a....
asked 1 hour ago -
The energy required to remove an electron from a surface of a
solid element is called...
asked 2 hours ago -
How would you train your employees to avoid risks of using
mobile devices?
asked 3 hours ago -
Assume Kw = 1.01 ✕ 10−14
For pure water, we can calculate [H3O+ ] = [OH...
asked 4 hours ago -
Suppose that on a temperature scale X, water boils at 203.0°X
and freezes at -105.7°X. What...
asked 5 hours ago -
BaS crystallizes in a cubic unit cell with S2- ions on each
corner and each face....
asked 5 hours ago -
A. 0≤P(Oi)≤10≤P(Oi)≤1 for each i
B. P(Oi)≤0P(Oi)≤0
C. P(Oi)=1+P(OCi)P(Oi)=1+P(OiC)
D. P(Oi)≥1P(Oi)≥1
If an experiment consists of...
asked 7 hours ago -
A battery has an emf of 9.20V and an internal resistance of 1.20
ohm. a)What resistance...
asked 7 hours ago -
The area of an elastic circular loop decreases at a constant
rate, dA/dt = −6.60×10−3 m2/s...
asked 8 hours ago -
The denaturation of proteins can be described by the
equilibrium
F⇌U
where F and U represent...
asked 9 hours ago -
Please answer what the maximum and minimum force is, and the
angle on the ion is...
asked 9 hours ago