2. Use the following information in the table to answer the following questions. (Numbers are in...
2. Use the following information in the table to answer the following questions. (Numbers are in trillions).
|
Year |
Potential GDP |
Actual GDP |
Price Level |
|
2014 |
$15.0 |
$15.0 |
110.0 |
|
2015 |
$15.4 |
$15.0 |
111.5 |
a. If Congress and the President want to keep real GDP at its potential level in 2015, should it use expansionary or contractionary fiscal policy?
b. If Congress and the President are successful in keeping real GDP at its potential level in 2015, state whether each of the following will be higher, lower, or the same as it would have been if they had not taken action:
- Actual GDP
- Potential GDP
- Inflation rate
- Unemployment rate
c. Assume that the MPC is 0.75. Holding other factors constant, how much will government purchases need to be increased to close the output gap? How much would taxes have to be decreased?
Homework Answers
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2. Use the following information in the table to answer the
following questions. (Numbers are in...
answer only part c. so The hypothetical information in the following table shows what the situation...
answer only part c.
so The hypothetical information in the following table shows what the situation will be in 2017 if Congress and the President do not use fiscal policy: Year 2016 2017 Potential GDP 17.8 trillion $18.2 trillion Price Level 113-7 115.9 Real GDP $17.8 trillion $17.8 trillion so a. If Congress and the president want to keep real GDP at its potential level in 2017, should they use an expansionary policy or a contractionary policy? In your so...
the follöwing iormation under the assumption that the government y policy Year 2015 2016 Price 112.0 114.4 Real GDP $15.0 tn $16.0 tn Potential GDP $15.0 tn $15.2 tn If the Fed wants GDP to be at...
the follöwing iormation under the assumption that the government y policy Year 2015 2016 Price 112.0 114.4 Real GDP $15.0 tn $16.0 tn Potential GDP $15.0 tn $15.2 tn If the Fed wants GDP to be at its potential in 2016, would it do and expansio contractionary policy? What could this contractionary/expansionary policy b a) Draw a diagram showing 2016 both with and without policy b) Assume the Fed is successful, for each of Real GD e, determine if they...
Macroeconomics Monetary Policy Questions The below information shows that economy needs corrective actions by the Central...
Macroeconomics Monetary Policy Questions
The below information shows that economy needs corrective actions by the Central Bank, which decided to use monetary policy. Year Actual Real GDP Potential GDP Price Level 2015 15.6 billion 15.8 billion 97 Answer the below questions: 1. If the Central Bank wants to keep real GDP at its potential level, should it use an expansionary or a contractionary monetary policy? 2. Explain the mechanism of that policy. Use the graph of Money demand and supply.
Price Level (CPI) The hypothetical information in the following table shows what the situation will be...
Price Level (CPI) The hypothetical information in the following table shows what the situation will be in 2015 if the government does not use fiscal policy. 115 Potential Real Year GDP Real GDP Price Level 2014 2015 $1.52 trillion $1.57 trillion $1.52 trillion $1.52 trillion 106.0 108.3 a. If Parliament wants to keep real GDP at its potential level in 2015, it should use policy government purchases and/or The government should be taxes. 106 b. Parliament is successful in keeping...
The graph depicts a dynamic aggregate demand (AD) and aggregate supply (AS) model of the economy....
The graph depicts a dynamic aggregate demand (AD) and aggregate supply (AS) model of the economy. Suppose that in 2003, the economy is in macroeconomic equilibrium, with GDP at GDP (year 1). The Fed projects that in 2004, the aggregate demand curve will be AD (year 2), that potential real GDP will be $12.45 trillion (GDP (year 2), and that actual real GDP will be $12.39 trillion LRAS (year 1) LRAS (year 2) SRAS (ycar1) SRAS (year 2 ear Year...
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Checkpoint 1 Problem 2 Question Help The table describes five possible outcomes for 2017 depending on the level of aggregate demand in that Price level (2016 100) Unemployment rate (percentage of labor force) year. Potential GDP is $8 trillion and the natural unemployment rate is 4 percent. A 102.5 9 105.0 6 C 106.0 5 Using Okun's Law, when the unemployment rate is 5 percent, what is real GDP? D 107.5 4 E 110.0 3 When the unemployment rate is...
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather...
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather than allowing the economy's natural adjustment mechanism to operate is that O A private sector expenditures increase on their own, the policy will stabilize real GDP. OB. It will shorten what might otherwise be a long recession OC. will reduce the inflationary pressure on prices that would otherwise ocur. OD. It wil dose the output gap. Click to select your answer MacBook Air Assume...
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Using Okun's law, fill in the four pieces of missing data in the table below. All of the following data are hypothetical Natural Actual Potential Unemployment Unemployment Year 2012 2013 2014 2015 Real GDP 15, 040 15,800 GDP Rate () Rate ( 16,000 16,000 16,500 3.5 17,160 Instruction: Enter your responses as whole numbers a. Actual unemployment rate in 2012 b. Potential GDP in 2013: $ 15800 c. Real GDP in 2014: $ 32000 Instructions: Enter your response rounded to...
answer only part c.
so The hypothetical information in the following table shows what the situation will be in 2017 if Congress and the President do not use fiscal policy: Year 2016 2017 Potential GDP 17.8 trillion $18.2 trillion Price Level 113-7 115.9 Real GDP $17.8 trillion $17.8 trillion so a. If Congress and the president want to keep real GDP at its potential level in 2017, should they use an expansionary policy or a contractionary policy? In your so...
the follöwing iormation under the assumption that the government y policy Year 2015 2016 Price 112.0 114.4 Real GDP $15.0 tn $16.0 tn Potential GDP $15.0 tn $15.2 tn If the Fed wants GDP to be at its potential in 2016, would it do and expansio contractionary policy? What could this contractionary/expansionary policy b a) Draw a diagram showing 2016 both with and without policy b) Assume the Fed is successful, for each of Real GD e, determine if they...
Macroeconomics Monetary Policy Questions
The below information shows that economy needs corrective actions by the Central Bank, which decided to use monetary policy. Year Actual Real GDP Potential GDP Price Level 2015 15.6 billion 15.8 billion 97 Answer the below questions: 1. If the Central Bank wants to keep real GDP at its potential level, should it use an expansionary or a contractionary monetary policy? 2. Explain the mechanism of that policy. Use the graph of Money demand and supply.
Price Level (CPI) The hypothetical information in the following table shows what the situation will be in 2015 if the government does not use fiscal policy. 115 Potential Real Year GDP Real GDP Price Level 2014 2015 $1.52 trillion $1.57 trillion $1.52 trillion $1.52 trillion 106.0 108.3 a. If Parliament wants to keep real GDP at its potential level in 2015, it should use policy government purchases and/or The government should be taxes. 106 b. Parliament is successful in keeping...
The graph depicts a dynamic aggregate demand (AD) and aggregate supply (AS) model of the economy. Suppose that in 2003, the economy is in macroeconomic equilibrium, with GDP at GDP (year 1). The Fed projects that in 2004, the aggregate demand curve will be AD (year 2), that potential real GDP will be $12.45 trillion (GDP (year 2), and that actual real GDP will be $12.39 trillion LRAS (year 1) LRAS (year 2) SRAS (ycar1) SRAS (year 2 ear Year...
Refer to the accompanying table to answer the questions that follow. (1) (2) (3) Real Domestic Output, Billions Aggregate Expenditures (Ca + lg + Xn + G), Billions $520 $500 Possible Levels of Employment, Millions 90 100 110 120 130 550 560 600 650 700 600 640 680 a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? Inflationary expenditure gap What will be the consequence of this...
Checkpoint 1 Problem 2 Question Help The table describes five possible outcomes for 2017 depending on the level of aggregate demand in that Price level (2016 100) Unemployment rate (percentage of labor force) year. Potential GDP is $8 trillion and the natural unemployment rate is 4 percent. A 102.5 9 105.0 6 C 106.0 5 Using Okun's Law, when the unemployment rate is 5 percent, what is real GDP? D 107.5 4 E 110.0 3 When the unemployment rate is...
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather than allowing the economy's natural adjustment mechanism to operate is that O A private sector expenditures increase on their own, the policy will stabilize real GDP. OB. It will shorten what might otherwise be a long recession OC. will reduce the inflationary pressure on prices that would otherwise ocur. OD. It wil dose the output gap. Click to select your answer MacBook Air Assume...
Using Okun's law, fill in the four pieces of missing data in the table below. All of the following data are hypothetical Natural Actual Potential Unemployment Unemployment Year 2012 2013 2014 2015 Real GDP 15, 040 15,800 GDP Rate () Rate ( 16,000 16,000 16,500 3.5 17,160 Instruction: Enter your responses as whole numbers a. Actual unemployment rate in 2012 b. Potential GDP in 2013: $ 15800 c. Real GDP in 2014: $ 32000 Instructions: Enter your response rounded to...
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