21 For each of the following scenarios, tell a story and predict the effects on the equilibrium level of aggregate output (Y) and the interest rate (r): a. During 2009, the Federal Reserve was easing monetary policy in an attempt to boost the economy. That same year, Congress passed the American Recovery and Reinvestment Act which cut taxes and expanded existing tax credits for working families and businesses. b. On January 1, 2018, the Tax Cuts and Jobs Act went into effect, lowering the top marginal tax rate for five of the seven income tax brackets. Assume that the Fed holds MS fixed. C. In 2014, the government raised taxes. At the same time, the Fed was pursuing an expansionary monetary policy. d. In March 2018, consumer confidence in the United States rose to its highest level since 2007, reflected by a rise in consumption. Assume that the Fed holds the money sup- ply constant. * The Fed attempts to increase the money supply to stimu- late the economy, but plants are operating at 65 percent of their capacities and businesses are pessimistic about the future. ntarctica.

21 For each of the following scenarios, tell a story and predict the effects on the equilibrium level of aggregate output (Y) and the interest rate (r): a. During 2009, the Federal Reserve was easing monetary policy in an attempt to boost the economy. That same year, Congress passed the American Recovery and Reinvestment Act which cut taxes and expanded existing tax credits for working families and businesses. b. On January 1, 2018, the Tax Cuts and Jobs Act went into effect, lowering the top marginal tax rate for five of the seven income tax brackets. Assume that the Fed holds MS fixed. C. In 2014, the government raised taxes. At the same time, the Fed was pursuing an expansionary monetary policy. d. In March 2018, consumer confidence in the United States rose to its highest level since 2007, reflected by a rise in consumption. Assume that the Fed holds the money sup- ply constant. * The Fed attempts to increase the money supply to stimu- late the economy, but plants are operating at 65 percent of their capacities and businesses are pessimistic about the future. ntarctica.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter32: Macroeconomic Policy Around The World

Section: Chapter Questions

Problem 9SCQ: Show, using the AD/AS model, how governments can use monetary policy to decrease the price level.

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