None Assume the classical model for a closed economy. Which of the following statements or graphs correctly indicates the long-run effect of contractionary fiscal policy?a. Investment expenditure rises.b. National saving declines.c. Output declines.d.rS₂S1r2r1I(r)12ILI,S

The classical model for a closed economy suggests that contractionary fiscal policy will lead to a…

Answered: Assume the classical model for a closed…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section: Chapter Questions

Problem 4TY

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Which of the following is an appropriate fiscal policy response to a negative GDP gap? a. raise income tax rates b. increase government spending c. raise real interest rates d. lower real interest rates
Q1. Use the Keynesian cross to explain why fiscal policy has a multiplied effect on national income.
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Define what is 'automatic stabiliser' in fiscal policy, and provide 2 examples
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Question 15/28 IV A BOOKMARK 15 MULTIPLE SELECT: If the government decides to utilize a contractionary fiscal policy, which of the following actions can it take? Pick all that apply. A Tax cuts B Tax increases C Spending cuts D Spending increases DELL esc Ce @ # $ % & 1 2 3 4 7 e r y k S f g. C V b m 个 N
Using the AE model, show the economy in equilibrium. Then, show the impact of an increase in government spending to reduce the unemployment rate.Would the above be considered expansionary or contractionary fiscal policy?Assume the change in government spending in above is $25 billion dollars and MPC = .95. What will be the change in GDP?
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Assume the classical model for a closed economy. Which of the following statements or graphs correctly indicates the long-run effect of contractionary fiscal policy? a. Investment expenditure rises. b. National saving declines. c. Output declines. d. r S₂ S1 r2 r1 I(r) 12 IL I,S