ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:Which of the following is not a predicted outcome of implementing automatic fiscal policy?
О а.
Reduces the size of the multiplier
O b. Helps prevent inflation due to inflationary gaps
O C. Moderates the business cycle
O d. Decreases the deficit
O e.
Reduces the effects of economic shocks
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Automatic fiscal policy, also known as an automatic stabilizer, is a type of fiscal policy that adjusts transfer payment and tax rates automatically to stabilize consumption, income, and spending (business) over the business cycle. An automatic stabilizer helps to tackle recession and economic slumps and was favored by Keynes.
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- 5. Demand side fiscal policy is also known as Keynesian Economic Theory * O True O Falsearrow_forwardPrice Level p* a LRAS Y* AD Real GDP AS Tools Fiscal Action 0 a. How does the short-run equilibrium compare to the initial equilibrium? The price level has (Click to select) and output has [(Click to select) b. What is the primary concern of policy makers under these conditions? high unemployment O declining value of the dollar O high Inflation V c. What policy action might the government take in order to improve economic conditions? (Click to select) fiscal policy by [(Click to select) taxes and/or (Click to select)government purchases d. Use the graph above to depict the goal of the fiscal action discussed Instructions: Use the tool provided 'Fiscal Action' to show the result of the policy action taken by the government. Plot only the endpoints of the line (2 points total). Label your line appropriately. e. What is the desired final outcome after the fiscal policy action and multiplier effect have occurred? A price level [(Click to select) P* and an output level [(Click to select) Y*…arrow_forward6. Does government borrowing crowd out private spending? Suppose a hypothetical economy is operating at an output level that is well below full employment. In an attempt to increase aggregate demand, the government borrows money in order to increase spending. According to Keynesian economists, how are each of the following items affected by the increase in government spending and borrowing? Increases Decreases Consumer and Business Optimism O O Consumption O Business Investment Oarrow_forward
- Which of the following statements is true of government spending? O An increase in government spending raises the equilibrium level of income by a multiple of the original spending increase. O Government spending is a part of monetary policy, not fiscal policy. O A decline in government spending brings about an expansion in the economy. O An increase in government spending increases the recessionary gap in the economy. An increase in government spending shifts the aggregate demand curve downward by a fraction of the rise in governiment spending.arrow_forwardhelp please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all workingarrow_forwardWhen the economy is in a recession, taxes decrease while spending increases and, as a result of this automatic fiscal policy, aggregate demand O induced; discretionary; is not changed O induced; needs-tested; increases O discretionary; induced; is not changed O discretionary; needs-tested; increases O needs-tested; induced; decreasesarrow_forward
- Need help with this. Thanks!arrow_forwardpls answer urgent all question Q1,a,b,c . Q1-Suppose the government reduces taxes by $20 billion, that there is no crowding out, and that the marginal propensity to consume is ¾. a. What is the initial effect of the tax reduction on aggregate demand? b. What additional effects follow this initial effect? What is the total effect of the tax cut on aggregate demand? c.How does the total effect of this $40billion tax cut compare to the total effect of a $40 billion in governmentpurchases? Why?arrow_forwardSuppose the current rate of inflation is about 14% and there is an inflationary gap of $150 billion in the economy. Which of the following policies would be most appropriate to reduce inflation if the marginal propensity to save (MPS) is equal to 0.05. A. Reduce government spending by $30 billion B. Reduce government spending by $50 billion. O C. Reduce government spending by $7.5 billion D. Reduce government spending by $150 billion OE. Reduce government spending by $25 billionarrow_forward
- 2arrow_forwardses Aside from the few years during Clinton's administration, what is the state of the national debt? Select one: O a. the debt is growing O b. the debt has been reduced considerably during the Bush and Obama administrations. O c. the debt is steadily shrinking O d. the debt is mostly staying the same Which president tried to limitarrow_forwardAnswr this for me mate. Much appreciated.arrow_forward
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