In Chapter-3 and also in the growth model where we studied about the long run, deficit...

In Chapter-3 and also in the growth model where we studied about the long run, deficit spending (a higher government spending for a given tax rate) appears to have a negative effect on the economy but in the IS-LM model we can see that the opposite is true. A higher G increases the GDP by enhancing demand. Which one do you think is true? Can you reconcile these two ideas? What is your conclusion in terms of practical policy?

Expert Solution

Rahul Sunny answered 2 years ago

In Chapter3 and also in the growth model where we studied about the long run, deficit...

In Chapter3 and also in the growth model where we studied about the long run, deficit spending( a higher government spending for a given tax rate) appears to have a negative effect on the economy but in the IS-LM model we can see that the opposite is true. A higher G increases the GDP by enhancing demand. Which one do you think is true? Can you reconcile these two ideas? What is your conclusion in terms of practical policy?

(2) We have studied auctions being run by sellers, but there are also auctions run by...

(2) We have studied auctions being run by sellers, but there are also auctions run by buyers. These are called reverse auctions or procurement auctions. Suppose that a company wants to buy one unit of a good. This company announces that they will run a second price procurement auction. The company will collect offers to sell one unit of the good from each of a group of firms and will buy the good from the firm that offers to sell...

1. In the Solow growth model, the rate of economic growth in the long run depends...

1. In the Solow growth model, the rate of economic growth in the long run depends on a. the rate of progress of the “effectiveness” of inputs or the growth rate of total factor productivity b. the population growth rate c. the savings rate d. the level of education of the population 2. The rate of economic growth of output per worker in the US between 1800 and 2011 a. depended mostly on changes in TFP (total factor productivity) b....

According to the Solow model of growth, growth, in the long run (the steady-state), determine only...

According to the Solow model of growth, growth, in the long run (the steady-state), determine only by growth in technology. However, in the Solow model, there is nothing about how technology determined. 1. What factors do you think might affect technology in the long run? 2. Justify your answer and explain the implications to the growth in the long run.

Consider the AS-AD model where the economy is not in long-run equilibrium, in particular, assume there...

Consider the AS-AD model where the economy is not in long-run equilibrium, in particular, assume there is a negative output gap (that is, the economy is in a recession). (a) Describe the adjustment under fixed exchange rates if there is no government intervention. (b) Contrast your answer with that under flexible exchange rates

14. In the Solow-Swan growth model of Chapter 8, the economy ends up in the long...

14. In the Solow-Swan growth model of Chapter 8, the economy ends up in the long run with a steady state level of capital per worker: A. only if it starts with capital per worker less than the steady-state level. B. only if it starts with capital per worker more than the steady-state level. C. only if it starts with capital per worker equal to the steady-state level. D. regardless of its starting level of capital per worker. 15. In...

Describe the long-run relationship between money growth and inflation. How does the long-run growth of income...

Describe the long-run relationship between money growth and inflation. How does the long-run growth of income affect this relationship? Use the Fisher equation to describe the long-run relationship between money growth and nominal interest rates.

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What are the benefits of increased population growth in BOTH the long-run and the very long-run...

What are the benefits of increased population growth in BOTH the long-run and the very long-run (growth models)? How about the benefits of a decreased population growth? Explain your reasoning in-depth.

ECO 252 - Macroeconomics 3.) Indicate if the long run growth of real GDP is likely...

ECO 252 - Macroeconomics 3.) Indicate if the long run growth of real GDP is likely to increase or decrease. Ceteris Paribus means all else constant. a. Political unrest lead the government to impose a martial law and to restrict movement of people and goods, Ceteris Paribus. b. The World Bank decreases the amount of loans available to subsistence farmers, Ceteris Paribus. c. Quotas on imported goods are imposed, Ceteris Paribus. d. The government offers tax credits to firms that...

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