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- Even during a financial recession, consumers tend to increase spending in _______Suppose there is a deflationary gap in the economy and the government plans to introduce expansionary fiscal policy to move expenditure closer to full employment level of output. They will increase spending on infrastructure projects such as roads, ports, bridges, dams etc. At the same time households and firms have become pessimistic about the future and cut back spending to save more for difficult days ahead. Answer the questions below based on the government's planned policy and consumers' and firms' pessimism. What happens to the Marginal Propensity to Consume in the economy ? Choose. What happens to the Spending Multiplier? Choose. Would the effect of expansionary fiscal policy on total demand be more effective or less More effective effective? Decreases Increase Less effectiveIn the United States, the various state governments almost all have laws that require them to balance their budgets, every single year. Such a law would require them to ___during a ____ , resulting in a ____ recession. recession ,boom ,bigger, smaller, decrease taxes, increase taxes
- What policy might the federal government implement with regard to taxes and spending to help stop the economy from falling into recession?When taxes increase, consumption _____, business investment ______, and real GDP output ______. A. decreases shifting aggregate demand left; decreases shifting aggregate supply left; decreases reducing economic growth, and lowering the standard of living. B. increases shifting aggregate demand right; increases shifting aggregate supply right; increases resulting in sustained economic growth, and a higher standard of living. C. decreases shifting aggregate demand left; decreases shifting aggregate supply left; increases resulting in sustained economic growth, equality and prosperity for all. D. None of the answers are correct.a) Why can't the government run a budget deficit in a one- period macroeconomic model? b) Why are government transfer payments not included in (expenditure-based) GDP?
- describe the economic viewpoints and theories of John Maynard Keynes. What were his views of the causes recessions and solutions to fixing them? In his view, what place did government have to improve markets? What does the concept of "crowding out" mean in all of this?4) Suppose an economy is producing real GDP of $600 billion. Potential GDP is equal to $540 billion, and the MPC is equal to 0.6. i)What kind of a gap (or problem) is this country experiencing? ii) What policy action do you suggest the government to take to eliminate the gap? State both the specific type of policy action and its size. Show your work for partial credit.Increasing government purchases of goods and services would have a bigger multiplier effect on real GDP than decreasing taxes, dollar for dollar. Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a b True False
- Question 21 An increase in real per capita GDP in an economy would __________ the average standard of living and would _________ life expectancy. raise; have little effect on raise; shorten raise; increase have no effect on; increase lower; shorten Question 22 An increase in _________ would lead to an increase in long-run economic growth. consumer spending and borrowing government taxes and fees resources and technology imports and exports prices and interest rates Question 23 Which of the following are the three major categories of resources? physical capital, technology, institutions land, labor, technology institutions, human capital, land natural resources, physical capital, human capital labor, physical capital, technologyIf taxes are increased, will most people save more or less than before? Does national saving rise or fall? Explain.Now consider an economy in which the government lowers its spending. In the long run, the result would be _____________ in the price level and _____________ in real output. an increase; an increase a decrease; no change a decrease; a decrease None of the listed options is correct. no change; a decrease
