Determine whether each policy below is expansionary (increasing aggregate demand) or contractionary (decreasing aggregate demand) and whether it is fiscal or monetary policy. 1. The Federal Reserve sells bonds. Expansionary Monetary Policy 2. Congress cuts defense spending. Contractionary Fiscal Policy V 3. The Federal Reserve raises the required reserve ratio. Expansionary Fiscal Policy 4. Congress increases payroll taxes. Contractionary Monetary Poli
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- Determine whether the following items are examples of expansionary fiscal policy, contractionary fiscal policy, expansionary monetary policy or contractionary monetary policy as they affect the aggregate demand of an economy. 1. Decrease in income taxes a. Expansionary fiscal policyb. Contractionary fiscal policyc. Expansionary monetary policyd. Contractionary monetary policy2. Increase in government spending a. Expansionary fiscal policyb. Contractionary fiscal policyc. Expansionary monetary policyd. Contractionary monetary policyDetermine whether the following items are examples of expansionary fiscal policy, contractionary fiscal policy, expansionary monetary policy or contractionary monetary policy as they affect the aggregate demand of an economy. 1. A Significant treasury bond buyback *a. Expansionary fiscal policyb. Contractionary fiscal policyc. Expansionary monetary policyd. Contractionary monetary policy 2. Issuance of new treasury bonds at a higher interest rate *a. Expansionary fiscal policyb. Contractionary fiscal policyc. Expansionary monetary policyd. Contractionary monetary policyColumn A: Objective for Aggregate Demand Write increase or decrease if you wish to increase or decrease aggregate demand. Column B: Action on Taxes Write increase or decrease if you wish to increase or decrease taxes. Column C: Action on Government Spending Write increase or decrease if you wish to increase or decrease government spending. Column D: Effect on Government Budget Write deficit if you wish to increase or the deficit (or reduce the surplus). Write surplus if you wish to decrease the deficit (or increase the surplus). (A) (B) (C) (D) OBJECTIVE FOR АCTION ACTION ON EFFECT AGGREGATE ON GOVERNMENT ON DEMAND TAXES SPENDING BUDGET (6) Business sales and investment are rapidly expanding. Many economists forecast strong inflation ahead. (7) Inflation persists while unemployment remains above 6%. 8 (8) A serious flu-like illness is now a pandemic. Forty- two states report many deaths. Many nations also affected.
- 10. In order to close an inflationary gap, the government needs to implement which of the following measures A. expansionary fiscal policy B. contractionary fiscal policy C. expansionary monetary policy D. contractionary monetary policy2.When an economy has an aggregate expenditure of $150 billion and the real GDP of $140 billion, then households bought fewer new homes than they anticipated. Select one:True or False 3. Even though both fiscal and monetary policies experience time lags, there are long time lags associated with the legislative process in implementing a fiscal policy which makes it more difficult to use than monetary policy. Select one:True or False 4.In an open economy, like Australia, fiscal policies are more effective than monetary policies when reducing the business cycle fluctuations. Select one: True or False 5.Technological change will shift up the per-worker production function and enable countries to have sustained economic growth. Select one:True or False Ans all.. otherwise don't ans1. Use of discretionary policy to stabilize the economy In an effort to stabilize the economy, is it best for policymarkers to use monetary policy, fiscal policy, or a combination of both? The following questions address the ways monetary and fiscal policies impact the economy and the pros and cons associated with using these tools to ease 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 economy in January 2025. According to the graph, this economy is in .To bring the economy back to the natural level of output, the government could use monetary or fiscal policy such as Shift the appropriate curve on the following graph to illustrate the effects of the policy you chose. 150 LRAS AS 110 X AD 70 24 26 OUTPUT (Trillions of dollars) PRICE LEVEL 130 85 50 20 22 28 30 AD ロー AS ? Suppose that in January 2025, policymakers undertake the type of policy that is…
- 3)Using the short-hand symbols G, Y, Md, r and I to demonstrate the effects of an expansionary fiscal policy.2)Using the short-hand symbols Ms, r, I, Y, and Md to demonstrate the effects of an expansionary monetarypolicy.1)Using short-hand symbols, explain the effects of a contractionary fiscal policy.1. Chapter 17: Using the AA-DD diagram, briefly explain: a. the effects of a temporary decrease in aggregate demand. b. how fiscal policy can be used to deal with (a) above. C. how monetary policy can be used to deal with (a) above.QUESTION 3 Match the following terms with their definitions. Recognition Lag Policy Lag Implementation Lag Impact Lag Discretionary Macroeconomic Policy Automatic Stabilizers Fiscal Policy…
- B. Move the Economy back to Potential GDP C. Do nothing D. Decrease Inflation, Lower Interest Rates, Increase Spending 33. If an Economy is producing below Potential GDP, the correct form of action is: A. Expansionary Monetary Policy combined with Contractionary Fiscal Policy B. Contractionary Monetary Policy combined with Expansionary Fiscal Policy C. Expansionary Monetary Policy or Expansionary Contractionary Policy or some Combination of both D. Contractionary Monetary and Fiscal Policy in the Same Amounts xt Predictions: On Editor Suggestions: Showing Et P + 51°When there is a problem of a delay in terms of implementation of the fiscal policy, that would be categorized as _____. execution lag information lag decision lag Fiscal policy nowadays are focused on eliminating GDP gap True False When the Central Bank controls the money supply by controlling the amount of high-powered money in the economy, that is called _____. interest rate fixation selective credit control open market operations required reserves ratio policy The focus of monetary policy nowadays is by using interest rate as an indicator. True FalseExplain the relationship between the effectiveness of monetary policy and the interest elasticity of money demand. Will the monetary policy be more or less effective the higher the interest elasticity of money demand? Explain. Now explain the relationship between fiscal policy and the interest elasticity of money demand. Why do the two relationships differ?