Explain the effectiveness of monetary and fiscal policy
when:
The interest elasticity of money demand is
high.
The interest elasticity of investment is
low.
(3.0 pts) How does the elasticity of domestic demand and supply
influence the size of the deadweight loss of an import tariff? What
will happen to the deadweight loss as the demand and supply become
price inelastic?
Discuss how the potency of fiscal policy to influence aggregate
demand (of the current year) depends on whether there are
households that currently face borrowing constraint or not for the
following cases. 1) (7 points) The government reduces the current
personal income-tax and it is supposed to be temporary. 2) (8
points) The government announces that there will be a temporary
reduction in the personal incometax in the next year.
Discuss how the potency of fiscal policy to influence aggregate
demand (of the current year) depends on whether there are
households that currently face borrowing constraint or not for the
following cases.
1) (7 points) The government reduces the current personal
income-tax and it is supposed to be temporary.
2) (8 points) The government announces that there will be a
temporary reduction in the personal income- tax in the next
year.
69. What does the effectiveness of fiscal policy at changing Y
have to do with the elasticity of money demand? Explain and
diagrammatically represent your answer.
3) Fiscal Policy
a. What does fiscal policy refer to?
b. How could fiscal policy affect AD?
c. Why would a government use fiscal policy to stabilize the
economy ?
d. What, specifically, would they do to stabilize?
e. What are some of the risks of using fiscal policy to
stabilize?
f. What are automatic fiscal stabilizers, and how do they affect
the budget deficit/surplus?
Fiscal policy involves
Question 1 options:
the use of interest rates to influence the level of GDP
the use of government purchases or taxes to influence the level
of GDP
decreasing the role of the Federal Reserve in the everyday life
of the economy
the use of government purchases to create recessions
Question 2 (1 point)
If the MPC = 0.5 and the current equilibrium GDP is $8000 and we
want it to be $10000, government spending needs to
Question...