Compare and contrast the effect of a rise in government spending on an economy under a)...
Compare and contrast the effect of a rise in government spending on an economy under a) fixed and b) floating exchange rate.
Homework Answers
Rise in government spending is a fiscal policy measure.
The following tabpe shows the effect of this policy on various factors.
| Floating exchane rate | Fixed exchange rate | |
| Output (Y) | No change | Increase |
| e (exchange rate) | Increase | No change |
| Net export (NX) | Decrease | No change |
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Compare and contrast the effect of a rise in government spending
on an economy under a)...
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...
Why is it so difficult to estimate the effect of Government spending on the economy and...
Why is it so difficult to estimate the effect of Government spending on the economy and how have economists addressed the problems?
compare and contrast the behaviour of the economy under adaptive and rational expectations
compare and contrast the behaviour of the economy under adaptive and rational expectations
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cu...
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate.
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate.
1. In deriving government spending multiplier we assumed that government spending is exogenously fixed. However, it...
1. In deriving government spending multiplier we assumed that government spending is exogenously fixed. However, it is also possible that government spending (G) increases with domestic income (Y). This is represented in the following equation. where G and g are parameters of the fiscal rule. The if GDP rises by $1, G rise by Sg x 1. marginal government spending rate: Government's choice variable here is G. Derive the government spending multiplier under this setup, i.e. derive ΔΥ/ΔG.
The government in an open economy increases spending. As a result, the supply of loanable funds...
The government in an open economy increases spending. As a result, the supply of loanable funds from national saving —, leading to a(n) — net capital outflow __ and a real exchange rate ___, a. falls, reduced, appreciation b. falls, increased, depreciation C increases, increased, appreciation d. increases, decreases, depreciation
6. Suppose the government stimulates domestic spending by increasing government pur chases or cutting taxes. Use...
6. Suppose the government stimulates domestic spending by increasing government pur chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate
(1) Calculate the government spending multiplier if, an increase in government spending by $5 million increases...
(1) Calculate the government spending multiplier if, an increase in government spending by $5 million increases real GDP by $20 million. Group of answer choices 0.20 0.25 2 5 4 (2) A major benefit of automatic stabilizers is that they: Group of answer choices guarantee a balanced budget over the course of the business cycle. have a tendency to reduce the national debt. moderate the effect of fluctuations in the business cycle. require legislative review by Congress before they can...
Suppose the government of a country wants to maintain full employment, there has been a rise...
Suppose the government of a country wants to maintain full employment, there has been a rise in the demand for its products by foreigners. using the dd-aa framework graphically show and discuss how the country can use monetary and fiscal policy to maintain full employment. contrast and discuss the effect of the two policies on the nominal exchange rate.
Efforts to stimulate the economy using expansionary monetary policy are ineffective under a fixed exchange rate...
Efforts to stimulate the economy using expansionary monetary policy are ineffective under a fixed exchange rate system, but can be effective under a floating rate system. Explain in some detail.
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...
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate.
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate.
1. In deriving government spending multiplier we assumed that government spending is exogenously fixed. However, it is also possible that government spending (G) increases with domestic income (Y). This is represented in the following equation. where G and g are parameters of the fiscal rule. The if GDP rises by $1, G rise by Sg x 1. marginal government spending rate: Government's choice variable here is G. Derive the government spending multiplier under this setup, i.e. derive ΔΥ/ΔG.
The government in an open economy increases spending. As a result, the supply of loanable funds from national saving —, leading to a(n) — net capital outflow __ and a real exchange rate ___, a. falls, reduced, appreciation b. falls, increased, depreciation C increases, increased, appreciation d. increases, decreases, depreciation
6. Suppose the government stimulates domestic spending by increasing government pur chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate
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