Suppose that the government wants to raise investment but keep output constant. According to the IS-LM model, what mix of monetary and fiscal policy will achieve this goal? Explain your policy recommendations. Illustrate your policy bundle in the IS-LM model.

Q: List pros and cons of government spending. Can government spending be shown on the IS model or the…

A: AD(aggregate demand) has the following components: AD=C+I+G+(X-M)C is consumption expenditureI is…

Q: Japan has had been in recession for decades despite having zero interest rates. Using the…

A: Recession refers to the economic situation in which the GDP per capita decreases and the…

Q: Fiscal and monetary policy are very important parts of AD and SRAS.Which of the following is correct…

A: Fiscal Policy: government's use of taxation and spending to influence the economy, with the aim of…

Q: dentify similarities and differences in the way Keynes and Hayek think about information and…

A: John Maynard Keynes and Friedrich Hayek were both famous economists with opposing views on how to…

Q: As a result of an economic policy change, interest rates and consumption rise but investment falls.…

A: Fiscal and monetary policies are two main tools to correct the economic imbalances . Where expansion…

Q: Using the AD/AS model, a tax change shifts O only the AS curve as it is a supply-side policy only…

A: Tax policy has an impact on both consumption and investment spending.

Q: Identify the various policy choices available when an economy experiences an inflationary or…

A: Inflationary gap refers to the situation when economy's real output is more than its potential…

Q: Apply the AD/AS model to discuss whether or not discretionary increases in government purchases…

A: Expanded/ Increased government spending is probably going to cause an ascent in total interest (AD).…

Q: 1. Let's consider the AS/AD model. Furthermore, assume two events happen at the same time:…

A: AD-AS model determines the equilibrium GDP and price level in the economy Aggregate demand…

Q: Differentiate between the following terms. Expansionary fiscal policy and expansionary monetary…

A: Expansionary fiscal policy is the policy which focuses on increasing aggregate demand by increasing…

Q: Can governments use expansionary fiscal policy or expansionary monetary to effectively fight…

A: Answer: The use of fiscal policy and monetary policy is an effective tool to control the…

Q: Suppose policymakers decide to reduce the budget deficit by cutting government spending. Use the…

A: The Keynesian Cross Model was developed by J.M. Keynes in the 1930s. According to Keynes, "Demand…

Q: Using the IS-LM model and assuming the central bank conducts monetary policy by manipulating the…

A: The LM represents Liquidity and Money. On the upward pivot of the chart, 'r' addresses the loan fee…

Q: Q: To what extent has the time-inconsistency problem influenced the formation and practical…

A: Time inconsistency is a problem that arises when policymaker follows one policy in advance but later…

Q: The following question relates only to the equilibrium in the goods market IN A CLOSED ECONOMY and…

A: Introduction The simple keynsian model is the keynsian economic model in a closed economy framework.…

Q: An increase in household consumption may increase output and the price level. Explain how monetary…

A: The government of an economy plays a major role in the development of an economy. With the help of…

Q: Why do economists often disagree about the conduct of macroeconomic stabilization policy?

A: Economic growth can take place only if the economy is stabilised. Macroeconomic stabilisation is a…

Q: * The accompanying diagram shows an AD/AS diagram. The economy begins at Eo with output equal to Y .…

A: Economies characterized as open engage in international trade and financial connections,…

Q: Briefly describe the two conclusions that can be drawn from an overview of Say’s Law with its…

A: Economics is the social science that studies the production, distribution, and consumption of goods…

Q: cost of a recession from the keynesian spending model perspective

A: Keynsian spending model pertains to the  aggregate-spending(AD) in the economy. In short-run, the…

Q: Keynesian economics defends budget balance. However, according to economists, budget balance may…

A: To understand Keynesian economics, we need to focus on two important things. One, the importance of…

Q: In the Keynesian Cross model, an increase in government purchases by one unit would generate an…

A: Answer: The given statement is false. In the Keynesian model, an increase in government spending…

Q: Compare and contrast the ideas of Keynes and the policies based on his ideas with the ideas and…

A: The Keynes and Supply side economics are two distinct  economic theories. Both stress upon different…

Q: The context in this is a large negative shock to autonomous consumption in an open economy. You may…

A: The aggregate supply is the total amount of services and commodities that firms in an economic plan…

Q: Why AD is never a constraint in the classical model?

A: Answer: The classical model assumes that supply creases its own demand (Say's law). So no matter how…

Q: The use of government purchases (G) as a fiscal policy tool can have an effect on long-run growth in…

A: Government purchase is also known as the government spending on goods and services. The federal’s,…

Q: Fiscal policy and monetary policy often change at the same time. Suppose the government wants to…

A: Fiscal policy means the taxes or expenditure is used in such a manner that the IS curve shifts…

Q: Match- Identify each item as Expansionary Contractionary Policy Used to stabilize high price levels…

A: Contractionary policy is used to reduce inflation, GDP, employment, price level and used in the…

Q: Please I need a short summary for this video:…

A: The question  asks to summarise the contents of the video which contains the mechanism involved in…

Q: Now that you have learned about the Keynesian perspective, what do you think about it?  In your…

A: Economics is the study of how the scarce resources of society are exploited. It is a social science…

Q: Keynes advocated the use of fiscal and monetary policy to stabilize an economy? When are the effects…

A: Classical economists believed in laissez-faire policy which means that there should be no government…

Q: In the AD/AS model, the multiplier magnifies the effect of autonomous spending, for example…

A: Aggregate demand is the total amount of spending on final goods and services at each possible price…

Q: Q.3.2 Explain, using the AD-AS model, how the South African Government can use fiscal policy as a…

A: Under various situations of uncertainty, there are various tools available before a government to…

Q: What is the difference between fiscal and monetary policy? What fiscal and monetary steps can the…

A: The tools of fiscal and monetary policy for keeping the growth of the economy stable include low…

Q: If the simple Keynesian macroeconomic model is used to explain expansionary fiscal policy, which of…

A: The theory of Keynesian economics states that the government should raise demand to increase growth.…

Q: Consider the extended IS-LM model analyzed a) Graphically analyze the effect of an increase in the…

A: IS-LM: The IS-LM is a macroeconomic model that represents when the money and product markets…

Q: Does the multiplier effect or crowding out effect occur with increasing gas prices in the United…

A:

Q: The Keynesian model suggests that .... should be preferred over .... since the ..... is larger than…

A: Government spending and tax cuts both are measures to stimulate the economy and increase national…