The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as towhether the government should attempt to stabilize the economy.Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply.The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates.The current tax system acts as an automatic stabilizer.Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president.Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses.Which of the following are examples of automatic stabilizers? Check all that apply.O Unemployment insurance benefitsThe federal funds rateCorporate income taxesO O O

Active stabilization policy by the government can be defined as the policy to maintain economic…

The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. O The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. O The current tax system acts as an automatic stabilizer. O Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. Which of the following are examples of automatic stabilizers? Check all that apply. O Unemployment insurance benefits O The federal funds rate O Corporate income taxes

The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. O The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. O The current tax system acts as an automatic stabilizer. O Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. Which of the following are examples of automatic stabilizers? Check all that apply. O Unemployment insurance benefits O The federal funds rate O Corporate income taxes

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The graph below depicts an economy where an increase in aggregate demand has caused Inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring Inflation under control. Price Level 160 150 140 130 120 110 100 90 80 70 60 50 Fiscal Policy LRAS AS Real GDP (billions of dollars) AD₁ AD 40 80 160 240 320 400 480 560 640 720 800 Instructions: Round your answers to 2 decimal places. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.75, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose Instead that the MPC is 0.5. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.
As the economy contracts, transfer payments O fall and tax revenues rise, causing the economy to contract by less than it would in the absence of automatic stabilizers. O fall and tax revenues fall, causing the economy to contract by more than it would in the absence of automatic stabilizers. O rise and tax revenues fall, causing the economy to contract by less than it would in the absence of automatic stabilizers. O rise and discretionary spending fall, causing the economy to contract by less than it would in the absence of automatic stabilizers. Question 11 Which of the following is considered discretionary government spending? O payments to Center for Discase Control (CDC) personnel O infrastructure maintenance spending all responses are correct. funding for the Environmental Protection Agency
Determine whether the following items are examples of expansionary fiscal policy, contractionary fiscal policy, expansionary monetary policy or contractionary monetary policy as they affect the aggregate demand of an economy. 1. A Significant treasury bond buyback *a. Expansionary fiscal policyb. Contractionary fiscal policyc. Expansionary monetary policyd. Contractionary monetary policy 2. Issuance of new treasury bonds at a higher interest rate *a. Expansionary fiscal policyb. Contractionary fiscal policyc. Expansionary monetary policyd. Contractionary monetary policy
Chapter 16: Understanding Consumer Behavior Question: The consumer's budget constraint reflects the fact that because interest is earned on savings future ... is worth ..... than current ww. ..... O a. income / less / income. b. consumption /more /income. consumption / more / consumption. O d. income / more / income. P e consumption/ less/consumption.
What can be done to counteract crowding out? Select one: O Households and firms can borrow anyways, even at higher interest rates, so there is no problem O The central bank can conduct monetary policy to keep interest rates low O Firms can negotiate with lenders to invest at rates that are lower than the going rate O Banks can simply refuse to raise their interest ates
Determine whether each policy below is expansionary (increasing aggregate demand) or contractionary (decreasing aggregate demand) and whether it is fiscal or monetary policy. 1. The Federal Reserve sells bonds. Expansionary Monetary Policy 2. Congress cuts defense spending. Contractionary Fiscal Policy 3. The Federal Reserve raises the required reserve ratio. Expansionary Fiscal Policy 4. Congress increases payroll taxes. Contractionary Monetary Poli
The government will have _____ flexibility in implementing countercyclical fiscal policy when the outstanding stock of government debt is _____ relative to the size of GDP. a.More; large. b.More; small. c.Less; insignificant. d.Total; large. e.Less; small. Consider an economy initially in a long-run equilibrium. A positive AS shock will _____ the price level and _____ output in the short run. In the long run, the price level will _____ and output _____. a.Increase; increase; return to its initial level; will be restored to potential output. b.Increase; increase; decrease; will be restored to potential output. c.Decrease; increase; return to its initial level; will be restored to potential output. d.Decrease; increase; decrease further; will be restored to potential output. e.Decrease; decrease; decrease further; will decrease further.
Select the correct option and explain why it is correct : a) Critics of discretionary fiscal policy argue that discretionary policy : 1) has uncertain effects 2) has an impact lag that is too short. 3) raises more inflation than policy rules. 4) has long recognition and implementation lags. b) The largest share of expenditures by state and local governemtnn is for : 1) Transfer payment 2) national defense 3) law enforcement 4) purchase of goods and services c) Countercyclical fiscal policy is designed to : 1) shift the inflation adjustment line so that real GDP is equal to potential GDP 2) reduce unemployment further when it is already at a low level 3) increase potential GDP 4) shift the aggregate demand curve so that real GDP equals potential GDP. d) Which of the following types of taxes provide the most revenue for the federal governemtn 1) Payroll taxes 2) income taxes 3) Sales taxes 4) corporate taxes
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