Pick five of the following statements and state whether they are true, false or uncertain, providing a short explanation that justify your answer 1. If (u-un) is negative, the output is at potential. 2. The growth rate of nominal GDP is not always higher than the growth rate of real GDP due to inflation. 3. A shock to households' propensity to consume leads to a sudden jump up of output. 4. The figure below describes the fiscal response to the global financial crisis: it shows that more indebted countries did not implement fiscal expansion. of GDP) 2000-10 Discretionary stimulus AUS o 0 eu 2 1 NZL Interest rate, DNK NLD KOR ●CAN ESP 40 USA GBR ●DEU ● PRT FRA 0 20 60 Net debt in 2007 (percentage of GDP) A ISR 'IS' 80 JPN 5. The diagram below potentially describes a situation in which the government implements an austerity plan, and the central bank implements a monetary contraction. LM ITA LM -1 0 100 Y. Y Output, Y 6. Real wages are constant when inflation expectations are anchored.
Pick five of the following statements and state whether they are true, false or uncertain, providing a short explanation that justify your answer 1. If (u-un) is negative, the output is at potential. 2. The growth rate of nominal GDP is not always higher than the growth rate of real GDP due to inflation. 3. A shock to households' propensity to consume leads to a sudden jump up of output. 4. The figure below describes the fiscal response to the global financial crisis: it shows that more indebted countries did not implement fiscal expansion. of GDP) 2000-10 Discretionary stimulus AUS o 0 eu 2 1 NZL Interest rate, DNK NLD KOR ●CAN ESP 40 USA GBR ●DEU ● PRT FRA 0 20 60 Net debt in 2007 (percentage of GDP) A ISR 'IS' 80 JPN 5. The diagram below potentially describes a situation in which the government implements an austerity plan, and the central bank implements a monetary contraction. LM ITA LM -1 0 100 Y. Y Output, Y 6. Real wages are constant when inflation expectations are anchored.
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
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Transcribed Image Text:Pick five of the following statements and state whether they are true, false or
uncertain, providing a short explanation that justify your answer
1. If (u-un) is negative, the output is at potential.
2. The growth rate of nominal GDP is not always higher than the growth rate
of real GDP due to inflation.
3. A shock to households' propensity to consume leads to a sudden jump up
of output.
4. The figure below describes the fiscal response to the global financial crisis:
it shows that more indebted countries did not implement fiscal expansion.
2000-10 Discretionary stimulus
(in percentage of 2000 GDP)
-20
AUS
5
4
3
2
10
Interest rate,
NZL
DNK
NLD
KOR
CAN
ESP
GBR
40
USA
● PRT
DEU
FRA
- ISA
20
60
Net debt in 2007 (percentage of GDP)
80
JPN
LM
ITA
LM
5
-1
5. The diagram below potentially describes a situation in which the
goverment implements an austerity plan, and the central bank
implements a monetary contraction.
0
100
Y. Y
Output, Y
6. Real wages are constant when inflation expectations are anchored.
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