Question

In: Economics

What would happen to a nation’s production possibilities curve when its expenditures on consumer goods/services =...

What would happen to a nation’s production possibilities curve when its expenditures on consumer goods/services = $2,300, expenditures on exports = $200, social security taxes = $250, corporate income taxes = $100, government spending = $700, personal income taxes = $800, expenditures on investment goods/services = $650, expenditures on imports = $350, and depreciation = $650.

a. This nation's PPC would expand.

b. This nation's PPC would contract.

c. This nation's PPC would remain unchanged.

d. There is not enough information to determine what happens to this nation's PPC.

and

According to Monetarist theory, the correct policy to restrain the economy would be to:

a. Raise taxes to decrease aggregate demand.

b. Increase the reserve requirement to decrease aggregate supply.

c. Buy bonds to increase aggregate demand.

d. Decrease government spending to decrease aggregate demand.

e. Increase the discount rate to decrease aggregate demand.

Solutions

Expert Solution

1. There is not enough information to determine what happens to this nation's PPC.

Explanation

A PPC shows various combination of goods that can be produced in an economy with the given set of resources. The given set of information does not include anything relavent to PPC.

2. According to Monetarist theory, the correct policy to restrain the economy would be to Increase the reserve requirement to decrease aggregate supply

Explanation

Monetarist theory states that money supply changes determine the economy's growth. Hence, in order to restrain the economy, the monetarist theory would presribe lowering the money supply in the economy, which is done by increasing the reserve requirements by the central bank

Rahul Sunny answered 2 years ago
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