ECON MACRO
ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
Question
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Chapter 11, Problem 3.11P

Sub-part

A

To determine

The fiscal policy effectiveness with a fall in the MPC

Concept Introduction:

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

Sub-Part

B

To determine

The fiscal policy effectiveness with a shorter lags in the effect of fiscal policy.

Concept Introduction:

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

Sub-Part

C

To determine

The fiscal policy effectivenesswhen consumers are more concerned with permanent income thancurrent income.

Concept Introduction:

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

Sub-Part

D

To determine

The fiscal policy effectiveness with a more accurate measurement of the natural rate of unemployment.

Concept Introduction:

Fiscal Policy: Fiscal policy is the policy by which government regulates the nation’s economy by adjusting the government spending and controlling the tax rates. It tries to influence the demand side of the economy.

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Students have asked these similar questions
Evaluate the effectiveness of fiscal policy as a tool to reduce unemployment.
Identify one fiscal policy action that could counter the increase in investments. Explain how this policy will affect each of the following.i. Output ii. The price level iii. Nominal interest rates
Label each of the following scenarios in which there are problems enacting and applying fiscal policy as being an example of either recognition lag, administrative lag, or operational lag.   To fight a recession, Congress has passed a bill to increase infrastructure spending but the legally required environmental impact statement for each new project will take at least two years to complete before any building can begin. Distracted by a war that is going badly, politicians take no notice until inflation reaches 8 percent. A sudden recession is recognized by politicians, but it takes many months of political deal making before a stimulus bill is finally approved. To fight a recession, the president orders federal agencies to get rid of petty regulations that burden private businesses – but the federal agencies begin by spending a year developing a set of regulations on how to remove petty regulations.
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