3 Suppose that in April the government undertakes the type of policy that is necessary to bring the economy back to the natural level of output in thepreceding scenario. In June 2023, U.S. imports decrease because the United States has implemented trade restrictions on French goods. Because oftheassociated with implementing monetary and fiscal policy, the impact of the government's new policy will likelyonce the effects of the policy are fully realized.Mic 9. Use of discretionary policy to stabilize the economyShould the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of howmonetary and fiscal policies affect the economy, and the pros and cons of using these tools to combat economic fluctuations.The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve(LRAS) for the U.S. economy in April 2023.Suppose the government decides to intervene to bring the economy back to the natural level of output by usingPRICE LEVEL150the13011089070502022LRAS2420OUTPUT (Trillions of dollars)ASAD2830| | 3ADASpolicy,Suppose that in April the government undertakes the type of policy that is necessary to bring the econonpreceding scenario. In June 2023, U.S. imports decrease because the United States has implemented traiassociated with implementing

The two sorts of adjustment strategies the Fed utilizes are expansionary monetary policy and…

Suppose that in April the government undertakes the type of policy that is necessary to bring the economy back to the natural level of ou preceding scenario. In June 2023, U.S. imports decrease because the United States has implemented trade restrictions on French goods. the associated with implementing monetary and fiscal policy, the impact of the government's new policy will once the effects of the policy are fully realized.

Suppose that in April the government undertakes the type of policy that is necessary to bring the economy back to the natural level of ou preceding scenario. In June 2023, U.S. imports decrease because the United States has implemented trade restrictions on French goods. the associated with implementing monetary and fiscal policy, the impact of the government's new policy will once the effects of the policy are fully realized.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.8P

See similar textbooks

Similar questions

On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because the product in question is now relatively less expensive than substitute products. Explain why aggregate demand does not increase for the same reason in response to a decrease in the aggregate price level. In other words, what causes total spending to increase if it is not because goods are now cheaper?
The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $4 trillion. The curves are labelled a, b, c, and d. Three points on the graph are also indicated by grey stars and labelled X, Y, and Z. PRICE LEVEL 160 150 140 130 120 110 100 90 80 0 с 1 d a 2 3 5 REAL GDP (Trillions of dollars) 6 7 b ? Identify which curve on the previous graph corresponds to each description in the following table. If the curve described does not appear on the graph, choose Not Shown.
1. Let us say the estimated equation for the economy's aggregate demand is Y=400 – 15P+ 8G And the estimated equation for the economy's aggregate supply is Y=5+11P-10W where Y is the country's real GDP, P is the price level (GDP deflator), G is government purchases of goods and services, and W is the index of wages. a. If G= 160 and W= 100, find the equilibrium real GDP and the price level in the economy. b. What is the simple multiplier in this economy? Give the number and explain how you figured it out. c. What is the inflation rate due to the government increasing its purchases from G=160 to G= 180 (expansionary fiscal policy), in %? d. What is the value of the multiplier when the price level varies? 2. Imagine an economy in which the slope of the AD curve is equal to the (negative of) slope of the AS curve. If the simple multiplier is equal to 5, what is the value of the multiplier when the price level varies? Give the number and explain how you figured it out.
3. Suppose an economy had aggregate demand components with the following relationships: Consumption Spending, C-140 +0.60*(DY) Investment Spending, I-25 +0.15"Y Government Spending, G-0 Net Export Spending, X=0 Tax Collections, Tx = 0 a. What is the equilibrium income for this economy (Show your work)? b. If the Government decided to Increase G spending by 6, what would be the new equilibrium income for this economy (Show your work)? Page 2 bed tooing c. If instead the Government decided to Reduce Tx (taxes) by 10 (i.e., send checks to people), what would be the new equilibrium income for this economy (Show your work)? d. If instead the Government decided to Increase G spending and Increase Tx (taxes) by 20, what would be the new equilibrium income for this economy (Show your work)?
This question checks whether you understand the procedure for deriving the economy's aggregate demand curve. Think back to how this curve was derived in class. Please identify which of the following steps comes first, second, third, and fourth. First ___________ Second __________ Third ___________ Fourth ___________ Choose : O. See what level of R is implied by the monetary rule. O. Draw the Spending Curve. O. Identify the point of Spending Balance (where Y = C+1+G+ X). O. Pick an inflation rate.
Worksheet 5: Aggregate Supply and Aggregate Demand Name: Complete the questions below. Be sure to show your work. Upload this worksheet to Moodle. Consider the following Aggregate Supply and Aggregate Demand curves. 1. P Draw 10 8 6 4 2 69% 20 40 G93 AS/AD LRAS 60 80 SRAS AD 100 120 GDP 3. Does this graph represent a Recessionary Gap, an Inflationary Gap, or an economy that is operating at its potential output? Explain. the graph. Pregate Demand?
Look at Figure 2. Assume this aggregate demand diagram represents an economy with government, where: a = exogenous consumption b = the marginal propensity to consume t = the tax rate |= investment G = government spending Y = income Figure 2 Aggregate demand AD, AD. 45° Income What is the equation for the aggregate demand schedule ADo? Select one: O ADO = b+ a(1 - t)G +1+ Y O ADO = a + b(1 – 1)Y + 1+ G O ADO = a + b(1 - t) I+ Y+ G O ADO = b+ a(1 – 1)Y + /+ G Next page > ( Previous page PHILIPS
The graph shows an economy's aggregate demand and aggregate supply curves and potential GDP. Does this economy have an inflationary gap or a recessionary gap? How does this economy return to full employment? This economy has _______ gap. It returns to full employment as _______. A. an inflationary; the money wage rate rises B. a recessionary; potential GDP increases C. a recessionary; the money wage rate falls D. an inflationary; aggregate demand decreases
8:31 1 ll DJ AII UN LIit abuv t ait luiT TLt. 20) Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve? A) They will move the economy up along a stationary aggregate demand curve. B) They will move the economy down along a stationary aggregate demand curve. C) They will shift the aggregate demand curve to the left. D) They will shift the aggregate demand curve to the right.
Worksheet 5: Aggregate Supply and Aggregate Demand Complete the questions below. Be sure to show your work. Upload this worksheet to Moodle. Consider the following Aggregate Supply and Aggregate Demand curves. 2. 3. D P 10 8 6 4 2 20 AS/AD 40 LRAS 60 80 140 SRAS AD Name: 100 120 GDP 4. Suppose the government increased spending (G). What would happen to Aggregate Demand? Draw the resulting curve, and mark a new equilibrium on the graph.
4. Briefly explain why each of the following would cause the Aggregate Demand curve to shift to the right(an increase), or to the left(a decrease):I. rapidly growing economies of our trading partnersII. a planned increase in spending by the Federal Government for Infrastructure Investment
2. Find an article in a major business publication, (for example, the Wall Street Journal, Barron's, the Harvard Business Review, Forbes) that describes an event that may affect the U.S. price level and real GDP. • Draw an initial set of AD and AS curves and determine which curve(s) will be affected and in which direction it will shift as a result of the AD/AS factors or policies. What are the factors or policies? Predict what will happen to price level and real GDP and explain your answer. All graphs must be properly labelled. Each axis must be correctly labelled, and the horizontal axis must indicate the nature of the graph itself.