Econ Macro (book Only)
6th Edition
ISBN: 9781337408745
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 11, Problem 13P
To determine
Impact of stimulus program during recession period.
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U.S. Congress Gives Final Approval to $787 Billion Stimulus
Feb. 13 (Bloomberg)-The U.S. Congress gave final approval to President Obama's S787 billion economic
stimulus package in hopes of wresting the economy out of recession.
Democrats predict the plan would save or create 3.5 million jobs... The stimulus plan would provide a
half-trillion dollars for jobless benefits, renewable energy projects, highway construction, food stamps,
broadband, Pell college tuition grants, high-speed rail projects, and scores of other programs.
The plan would pump $185 billion into the economy this year and $399 billion next year, the agency said.
-Brian Faler
Source: Bloomberg.com, February 13, 2009.
If consumers had an MPC of 0.90, by how much would AD have
eventually increased with Obama's first-year spending stimulus,
assuming the stimulus was entirely government spending?
billion
Question 16
If the economy is in stagflation, what would eventually happen as a result if no fiscal policy is used and the
economy adjusts back to full employment?
Prices would increase and unemployment would increase
O Prices would increase and unemployment would fall
Prices would fall and unemployment would increase
Prices would fall and unemployment would fall
40. Which of these would help a government fight a recession?
raising taxes
cutting taxes
cutting spending
paying down the national debt
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Similar questions
- Fiscal Policy) Was fiscal policy effective when the U.S. economy was experiencing stagflation during the 1970s? Why or why not?arrow_forwardQuestion: "In a hypothetical economy, the government implements a fiscal stimulus package by increasing public spending on infrastructure projects. At the same time, there is a significant rise in consumer savings rates. Discuss the potential short-term and long- term impacts of these simultaneous events on the economy's aggregate demand, interest rates, and inflation. Consider how these changes might affect the effectiveness of the fiscal stimulus in achieving its intended economic objectives."arrow_forwardProblem 12-09 (algo) The CARES Act of 2020 increased disposable income by $600 billion. If consumers spent $430 billion of those income transfers immediately, Instructions: In part a, round your response to two decimal places. In part b, round your response to the nearest whole number. a. what was the MPC? b. how much stimulus would those income transfers ultimately provide?arrow_forward
- f Congress and the president decide an expansionary fiscal policy is necessary, then they should target higher interest rates by decreasing the money supply. enact policies that increase government spending and decrease taxes. Oenact policies that decrease government spending and increase taxes. O target lower interest rates by increasing the money supply. 2001-20 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward15. What is unemployment? Explain various types of unemployment. 16. Explain the budget deficit and surplus. How the government financed the deficit?arrow_forwardAn economy is in long-run macroeconomic equilibrium when each of the following aggregate demand shocks occurs. What kind of gap - inflationary or recessionary - will the economy face after the shock, and what type of fiscal policies would help move the economy back to potential output? How would your recommended fiscal policy shift the aggregate demandcurve? (Note: you do not need to draw anything).(a) A stock market boom increases the value of stocks held by households.(b) Firms come to believe that a recession in the near future is likely.(c) Anticipating the possibility of war, the government increases its purchases of military equipment.(d) The quantity of money in the economy declines and interest rates increase.arrow_forward
- Give some examples of changes in federal spending and taxes by the government that would be fiscal policy and some that would not.arrow_forwardASAParrow_forwardAnswer part D) Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion while raising only $4 trillion worth of taxes. Instructions: Round your responses to one decimal place. a. What will be the government’s deficit? $____billion b. If the government finances the deficit by issuing bonds, what amount of bonds will it issue? $ ______ billion c. At a 3 percent rate of interest, how much interest will the government pay each year? $ ________ billion d. Add the interest payment to the government’s $5 trillion expenditures for the next year, and assume that tax revenues remain at $4 trillion. In the second year, compute the (i) Deficit. $ _________ billion (ii) Amount of new debt (bonds) issued to finance the deficit in the second year. $ ________ billion (iii) Total debt at the end of the second year. $ __________ billion (iv) Debt service requirement. $ _______billionarrow_forward
- 1 Assume the aggregate demand of an economy is rising at 3%, but its productive capacity is only rising at 2%. Discuss the type of inflation this would lead to. Use a diagram to motivate your answer. 2 Explain how fiscal policy can be implemented if an economy is in the downswing of a business cycle.arrow_forwardPlease answer all question, it's really matter. ( not very long, just short understandable answers) 1. Does the US currently rely more on fiscal policy or monetary policy to stabilize the economy? 2. Does fiscal policy have an expansionary bias? explain 3. Does fiscal policy have an expansionary bias?arrow_forward13. Study Questions and Problems #13 Suppose the president proposes an $800 billion economic stimulus package intended to create jobs. A major criticism of this new spending proposal is that it is not matched by a tax increase. Assume the U.S. economy is below full employment, and Congress has passed a law requiring that any increase in spending be matched or balanced by an equal increase in taxes. The MPC is 0.75, and aggregate demand must be increased by $1,000 billion to reach full employment. Will the economy reach full employment if Congress increases spending by $800 billion and increases taxes by the same amount? True or False: If Congress increases spending by $800 billion and increases taxes by the same amount, the economy will not reach full employment. True O Falsearrow_forward
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