Macroeconomics
Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 27, Problem 9SPA

(a)

To determine

Identify the Country U policymaker’s response in growth if the world economy slows in which a policy change is recommended by the classical macroeconomist, a Keynesian, and a monetarist.

(b)

To determine

Identify the Country U policymaker’s response if the world price of oil rises in which the policy changes are recommended by the classical macroeconomist, a Keynesian, and a monetarist.

(c)

To determine

Identify the Country U policymaker’s response if the Country U’s productivity declines in which the policy changes are recommended by the classical macroeconomist, a Keynesian, and a monetarist.

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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, as well as the pros and cons of using these tools to combat economic fluctuations. The following graph plots hypothetical aggregate demand (AD), short-run aggregate supply (AS), and long-run aggregate supply (LRAS) curves for the U.S. economy in May 2026. Suppose the government chooses to intervene in order to return the economy to the natural level of output by using policy. 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 50 30 130 110 8 70 80 50 20 20 22 24 LRAS 28 AS OUTPUT (Trillions of dollars) AD 28 30 AD ਵੇ ㅁ AS ? Suppose that in May 2026 the government successfully carries out the type of policy necessary to restore the natural level of…
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