Question

QUESTION 13

Economists and policy makers questioned the effectiveness of discretionary fiscal policy during the 1970s for all the following reasons except

a		the difficulty of estimating the natural rate of unemployment
b		the time lags involved in implementing fiscal policy
c		the existence of possible feedback effects of fiscal policy on aggregate supply
d		the distinction between current and permanent income
e		the problems of inflation and unemployment were basically solved

QUESTION 14

Fiscal policy

a		uses the federal government's powers of spending and taxation to affect employment, the price level, and GDP
b		uses the federal government's powers over the money supply and interest rates to affect employment, the price level, and GDP
c		can affect employment and prices, but not the level of GDP
d		can affect employment and the level of GDP, but not the price level
e		is most effective when employed by state governments rather than by the federal government

QUESTION 15

Fiscal policy under the Reagan administration was intended to

a		stimulate the economy by decreasing taxes in order to increase consumption
b		increase tax revenues by increasing the tax rate
c		balance the budget by increasing defense spending and increasing taxes
d		stimulate the economy by decreasing taxes in order to increase aggregate supply
e		stimulate the economy by increasing government spending in order to increase aggregate supply

  

QUESTION 16

If net taxes exceed government purchases,

a		the price level will rise
b		the money supply must fall
c		the aggregate demand curve will shift rightward
d		the short-run aggregate supply curve will leftward
e		there will be a federal budget surplus

Answer 1

Ans 13 :- E) The problems of inflation and unemployment were basically solved.

discretionary fiscal policy mean there are intentionally and willfully changes in governments taxations policy and government spending during a period of tims. according to fiscal policy govt chage there spending and taxtion policy for overcome the inflation rate and unemployment issue.

So In that time economist and policy makers was questined about the Inflation and unemployment.

Ans 14 :- A) uses the federal government's powers of spending and taxation to affect employment, the price level, and GDP.

Fiscal policy is the policy thats use by government. In the fiscal polict govt use taxes and spendings to affect employment and countries economy.

Monetary policy is the policy thats use by the monetary authority of the country to control intrest rates and money supply for overcome inflation. Momentary authority is the central bank of the country.

So in U.S. federal government use the fiscal policy.

Ans 15 :- D) stimulate the economy by decreasing taxes in order to increase aggregate supply.

In the period of ronald reagan presidency in U.S. they reduce the decrease the tax rate as the effect industries was produced more product and gave more wages to in courage labours. When the production are more then supply also more in market than demand. Therefore more production industries can export their products and they will earn foreign exchange. When Foreign exchange creat surplus is countries BOP. So as countries GDP also increase.

Ans 16 :- E) there will be a federal budget surplus.

When Net taxes is more than government purchase is so surplus because govt collect more revenue and spending is less. So it is the income of government sectors. To find govt surplus formula is;

When amount is more than zero is show surplus.

When amount is less than zero it show defecit.