Keynesian economists argue that facing an economic recession. and are the surest way to ensure full employment, especially when A government spending increases; tax cuts government spending cuts; tax increases
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- Exercise D24 Compare two policies: a tax cut on income or an increase in government spending on roads and bridges. What are both the short-term and long—term impacts of such policies on the economy?If the economy is operating in the neoclassical zone of the SRAS curve and aggregate demand falls, what is likely to happen to teal GDP?Imagine there is a consumption smoother (also known as a PIH consumer) who expectsto live for another 40 years and to work for another 30 years. They just learned thatthey will receive a permanent pay increase from their job of $800. How much extra dothey consume this year? What is their marginal propensity to consume?
- uèstion 21 pounts The economy is in a recession. The government enacts a policy to increase the real GDP by $10 billion. The MPS is 0.2. Assuming that the agggregate supply curve is horizontal across the range of GDP being considered, by how much should the government change spending or taxes in order to achieve its objective? Show your calculations. e For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 10pt A v x X, Re v 55 OWORDS POWERED 図 田 lili 用Use the Keynesian cross to predict the impacton equilibrium GDP of the following. In eachcase, state the direction of the change and give aformula for the size of the impact.a. An increase in government purchasesb. An increase in taxesc. Equal-sized increases in both governmentpurchases and taxesConsider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is government consumption expenditure, I is investment expenditure, c is the marginal propensity to consume. In this model, if lthere is an increse in both labor productivity and the marginal propensity to consume while autonomus expenditures remain unchanged, what will happen to the level of employment? a. can't say for sure b. decreses c. stays the same d. increases
- Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result. Real GDP Consumption PlannedInvestment GovernmentPurchases Net Exports $9,000 $7,800 $1,500 $1,000 -$700 $10,000 $8,600 $1,500 $1,000 -$700 $11,000 $9,400 $1,500 $1,000 -$700 $12,000 $10,200 $1,500 $1,000 -$700 $13,000 $11,000 $1,500 $1,000 -$700 $14,000 $11,800 $1,500 $1,000 -$700 Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result. Real GDP Consumption PlannedInvestment GovernmentPurchases Net Exports $9,000 $7,800 $1,500 $1,000 -$700 $10,000 $8,600 $1,500 $1,000 -$700 $11,000 $9,400 $1,500 $1,000 -$700 $12,000 $10,200 $1,500 $1,000 -$700 $13,000 $11,000 $1,500 $1,000 -$700 $14,000 $11,800 $1,500 $1,000 -$700 (a) What is the equilibrium level of real GDP in this economy? (b) Compute the marginal propensity to consume. (c) Compute the government expenditures multipler. (d) Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?QUESTION 20 Consider an economy that is producing an aggregate output of Y2 shown in the figure below. The economy fäces can be closed by Aggregate price level which fiscal policy. LRAS SRAS AD2 AD1 AD Y2 Yp Y1 Real GDP Oa. an inflationary gap; expansionary O b-a recessionary gap; expansionary Oc a recessionary gap; contractionary O d an inflationary gap; contractionary
- Congratulationst You have been appointed an economic policy adviser to the United States, You are told that the economy is significantly abowe futtemplyoment GDP. Based on this inlormation, how can the economy would adjust to reach LR.SR Equilbrium (Classical View)? The economy wilt experience low unemployment rate, pushing wages up, and increasing the pelces of a key input (labor). shatting the sAS to the left (up). The economy will experience high unemployment rate, pushing wages down, and reducing the prices of a key input (labor). shiting the SAS to the right (down). The econoriny wil experience low unemployment rate, decreasing inceme, which will eventually shift the AD to the left. The eooncmy will experience low unemployment rate, pushing wages up, and increasing the prices of a key input (labor), shiting the sAs to the night (down).can you tell me which questions i've gotten wrong? This is a practice quiz that doesnt tell you the correct answers at the end. thanks 1- An increase in business investment spending has the same effect on the level of ad as an increase in the same amount of government spending. -true 2- If the government increased taxes by $10 at the same time it increased spending by $10 there would be no effect on the level of AD. 3- If social security payments to retirees increase, AD will increase and raise Y*. -true 4- Tax cuts in the classical range of the AS will stimulate output and unemployment -false 5- Increasing welfare payments by borrowing money to do so will increase AD- true 6- if the mpc increases, the multiplier decreases- false 7- if the mps increases the multiplier decreases -true 8- part of the cost of growing government budget deficits is and “opportunity cost” of what else could have been done with the money, particularly if the borrowing is used to increase consumption spending.…1Why low rate inflation is considered necessary for economic grwoth? Oa It does not affect the purchasing power of wages Ob. It indicates that the currency is in continuous demand by the people Oc taffects only the rich and not the poor Od itact as an incentive to boost in supply in the economy 2When the economy is in Keynesian macroeconomic equilibrium, planned investment is greater than actual investment. O a False O b. True 3Government fixes the floor and ceiling price which will not allow the producers to increase the price on their wish, this is a type of. O a Physical control called price pegging O b. Monetary policy control measures O. Physical control called price tagging Od. Fiscal policy control measures O e None 4Rising output coupled with falling prices is called stagflation O a. False O b. True 5The Value of marginal propensity to consume lies O a. O to 1 O b. Less than zero Oc -1 to 1 Od. Between O to 1 6The Central Bank way to control inflation is Oa Monetary policy…
