Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, and the pros and cons of using these tools to combat economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in February 2020. Suppose the government decides to intervene to bring the economy back to the natural level of output by using Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output. PRICE LEVEL 150 130 110 90 70 50 20 22 LRAS 24 26 OUTPUT (Trillions of dollars) AS AD 28 30 AD ģ policy. AS Suppose that in February the government undertakes the type of policy that is necessary to bring the economy back to the natural level of output given in the previous scenario. In April 2020, consumer confidence increases, leading to an increase in consumer spending. Because of the ▼ associated with implementing monetary and fiscal policy, the impact of the government's new policy will likely once the effects of the policy are fully realized.

Decrease/increase

What are leakages in the circular flow diagram?  (B) Give example of leakage in a three sector economy

Each term (3 months) the current group of economics students completed a questionnaire as to how much they would spend on new purchases compared to how much they would save/pay off bills, if they suddenly and unexpectedly received a check for $1,000. The average MPC is shown in the table below. Month in which student poll was taken Average of students’ responses as MPC March 0.41 June 0.30 September 0.22 December 0.56   What do these MPC’s imply about the students’ thinking over the course of the year?   (Enter response here.)   What is likely happening in the economy during the same period of time?

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How does the National Bureau of Economic Research (NBER), set the recession, peak and trough dates in the U.S. and what data is used as input?