A country is experiencing a recession due to an unexpected shock to aggregate demand. The economy's current level of real GDP is below its long-run equilibrium and the price level is below the equilibrium price level. Government officials must decide whether to implement fiscal policy or allow the economy to return to full employment on its own. a. Suppose that government officials have decided to implement expansionary fiscal policies. What are their desired outcomes? Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click again to empty the box for the incorrect answers. ? increase aggregate supply ?increase aggregate demand ? expand real GDP ? raise the price level ?reduce unemployment ? control inflation b. Which of the following policy is consistent with expansionary fiscal policy? O Increase sales tax rates. O Reduce personal income tax rates. O Reduce spending on government infrastructure. O Increase the amount of currency in circulation. c. When comparing the two options for restoring the economy to its full-employment level of output, the benefit of allowing the economy to return to full employment on its own is that O full employment is reached with a higher price level. O full employment is reached with a lower price level. O lower unemployment and higher real GDP are reached. O the economy will recover faster without fiscal policy.

Suppose the economy had been producing at potential output but is now experiencing a recession. Which of the following are discretionary fiscal policies that could bring the economy closer to potential output? Check all that apply. a)Additional spending on national park facilities   b)A tax hike   c)A reduction in government purchases   d)A tax cut

If Investment = f(r*) a.  Explain with pictures how it affects the balance of Supply/Saving and Investment Demand in the event of Fiscal policy, namely by decreasing state spending and increasing taxes. b.  Explain with pictures how it affects the balance of Supply/Saving and Investment Demand in the event of Fiscal policy, namely by decreasing state spending and increasing taxes if it happens overseas

Fiscal Policy: Recessionary vs Expansionary Policy Complete the following exercises. 1. Describe a policy measure the government can use to close a recessionary gap. 2. Illustrate your response to question 1 in a graph. 3. Describe a policy measure the government can use to close an inflationary gap. 4. Please Illustrate Graphically in response to question (question 3: Describe a policy measure the government can use to close an inflationary gap.)

The economy is experiencing negative GDP growth and high unemployment.  Which fiscal policy action should the government implement in an attempt to fix this problem?     A.) increase spending B.) raise taxes C.) increase the reserve requirement D.) decrease interest rates

Identify one fiscal policy action that could counter the effects identified in part (a). Explain how this policy will affect each of the following. Output Employment The price level

a) What are the three fiscal policy tools and how would each be used to counter a contractionary gap? b) True or False and explain: Fiscal Policy is effective at reducing the duration of an economic contraction. c) If the spending multiplier is 2.5 and the economy is in a $500 billion contractionary gap, how much should I increase government purchases to eliminate the gap? d) Continuing with c, if the MPC is 0.8, how much would I need to increase transfer payments to eliminate the $500 billion contractionary gap? e) True or False and explain: Households always react to tax changes in a predictable manner. Module 6: Deficits and the Debt. a) Distinguish between deficit and debt. b) Explain what crowding out is and why it reduces the impact of fiscal stimulus. c) True or false and explain: The national debt represents a threat of bankruptcy. (For d and e) Suppose the interest on the debt was $600 billion. If interest is paid domestically, 90% will be spent domestically (the remainder is…

please answer the following question: 1.The fact that it takes time for government officials to recognize an economic problem in is one reason for time lags in fiscal policy making. a)true  b)false

The U.S. is in a recession due to decreased Aggregate Demand in the economy. Should the government use Keynesian or Supply Side fiscal policy to counter the contraction? Explain using specific government actions (at least 2). 1 paragraph.

a) What are the three fiscal policy tools and how would each be used to counter a contractionary gap?   b) True or False and explain: Fiscal Policy is effective at reducing the duration of an economic contraction.   c) True or False and explain: Households always react to tax changes in a predictable manner.