Refer to Figure 10-1. If the economy is below full-employment real GDP, what will the new long-run equilibrium be if the government plays an expansionary fiscal policy? OAB1 ONE2 acto DE3
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- Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?Which of the following is NOT a tool of fiscal policy. O taxes O government spending Onterest rates none of the above Question 2 Assume the economy is in a deep recession. The appropriate fiscal policy response would be to: raise taxes and raise govemment expenditures cut taxes and cut govermment expenditures raise taxes and cut government expenditures O cut taxes and increase government expenditures D Question 3 Crowding out refers to the fact that: Tax cuts will cause inflation O Tax cuts may result in higher interest rates which will "crowd out" business investment spending O increased government spending will crowd out spending on imports none of the aboveHi this question is for macroeconomics but on bartleby does not show any option for macroeconomics As a result of COVID-19, the Government of Canada has been actively using a discretionary fiscal stimulus policy. Using the Aggregate Supply – Aggregate Demand model, illustrate the intended impact of this policy on Aggregate Demand. Has the fiscal stimulus policy been effective? Why or why not? When the discretionary fiscal stimulus policy has ended, what actions with respect to the budget, will the government have to consider to address the debt level resulting from the discretionary fiscal stimulus policy?
- 10.1For each of the following events,explain the short-run and long-run effects on output and price level,assuming policymakers take no action. a) The stock market declines sharply,reducing consumers' wealth. b) The federal government increases spending on national defence. 10.2 In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment?Explain. a)When the investment accelarator is large or when it is small?Which of the following would be classed as an expansionary fiscal policy? O A. An increase in the money supply Ов. A reduction in the number of goods exempted from VAT An increase in government taxation OD. An increase in government expenditureWhich of the following is not a predicted outcome of implementing automatic fiscal policy? О а. Reduces the size of the multiplier O b. Helps prevent inflation due to inflationary gaps O C. Moderates the business cycle O d. Decreases the deficit O e. Reduces the effects of economic shocks
- 15. If consumers in a country spend 3/4 of their disposable income. If their governmentincreases its spending by 75 trillion and in order to maintain a balanced budgetsimultaneously increases taxes by 75 trillion. Calculate the effect of the 75 trillion change ingovernment spending and 75 trillion change in taxes on the country’s aggregate demand.QUESTION 20 Consider an economy that is producing an aggregate output of Y2 shown in the figure below. The economy fäces can be closed by Aggregate price level which fiscal policy. LRAS SRAS AD2 AD1 AD Y2 Yp Y1 Real GDP Oa. an inflationary gap; expansionary O b-a recessionary gap; expansionary Oc a recessionary gap; contractionary O d an inflationary gap; contractionarySRAS PL AD2 AD Y, Y2 REAL GDP The Aggregate Demand Model shows an increase in Aggregate Demand or GDP, Which type of Fiscal Policy was used and why? O Contractionary Policy to increase GDP and Increase Inflation O Contractionary Policy to decrease GDP and lower the unemployment rate O Expansionary Policy to raise GDP and lower the unemployment rate O Expansionary Policy to raise GDP and lower Inflation PRICE LEVEL
- 16) What is the first signal that policy makers may need to examine expansionary fiscal economic policy A. A decrease in AS B. A decrease in AD C. A decrease in LRSA D. An increase in ASThe graph below shows real GDP levels over time. Answer the following questions based on this graph. Real GDP Business Cycle A Time a. At time T, what is the economy experiencing? O an economic expansion O full-employment output O an economic contraction b. In order to smooth out the business cycle, what type of fiscal policy should the government undertake? O expansionary fiscal policy O contractionary fiscal policy c. What type of actions might the government take? O a decrease in taxes and an increase in government purchases O an increase in taxes and a decrease in government purchases O a decrease in both taxes and government purchases. O an increase in both taxes and government purchasesSuppose the economy is in recession. Policymakers estimate that aggregate demand is$100 billion short of the amount necessary to generate the long run natural rate of output.That is, if aggregate demand were shifted to the right by $100 billion, the economy wouldbe in long run equilibrium.a. Explain the impact on the economy if the government chooses to use fiscal policy tostabilize the economy and the marginal propensity to consume (MPC) is given as0.75 with no crowding out.
