When in a recession a government has the option to increase government spending or decrease taxes...

When in a recession a government has the option to increase government spending or decrease taxes to stimulate the economy. Discuss which piece of GDP is being targeted when each is used. Explain what happened in 2008, what went wrong? and what are some steps that could have been taken to avoid the recession of 2008?

Expert Solution

Rahul Sunny answered 2 years ago

Would it be more likely for the federal government to increase taxes or decrease spending?

A decrease in government purchases, an increase in net taxes, or some combination of the two...

A decrease in government purchases, an increase in net taxes, or some combination of the two is designed to: Select one: a. shift the economy's aggregate demand curve inward b. result in no change in the economy's price level c. move the economy to potential output without the resulting inflation d. all of the above e. a. and c.

When the economy is in a recession, the government will want to increase output. If the...

When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.7 and the government increases spending by 147, how much will output increase by?

Suppose Country A is suffering from recession. The policy makers could increase the government spending to...

Suppose Country A is suffering from recession. The policy makers could increase the government spending to raise the output to end the recession. But such a policy could also cause a negative side effect on AD and therefore reduces the policy effectiveness. Explain. Except raising government spending, adjusting interest rate might be an alternative. Recommend such an alternative policy to the government that is also suitable for the current situation of Country A. Illustrate one method that the government can...

Automatic stabilizers are changes in taxes or government spending that decrease aggregate demand without requiring policymakers...

Automatic stabilizers are changes in taxes or government spending that decrease aggregate demand without requiring policymakers to act when the economy is in an expansionary boom that is causing inflation. Select one: True False If there is no change in the unemployment compensation program, then the total amount of benefits paid to participants in the program will fall during economic expansions and rise during recessions. Select one: True False Critics of stabilization policy argue that the policy can be a...

In a binding situation, a decrease in government spending

In a binding situation, a decrease in government spending Select one: a. does not shift the ADcurve. b. causes the ADcurve to become horizontal. c. shifts the ADcurve to the right. d. shifts the AD curve to the left. An increase in government purchases shifts the _______ curve to the _______ Select one: a. aggregate supply; right b. aggregate supply; left c. aggregate demand, left d. aggregate demand; right Which of the following is an example of an expansionary fiscal policy? Select one: a. the federal government increasing the amount of money spent on...

By how much would the government spending need to increase to prevent the $300mil decrease in output?

Imagine that the US economy suddenly falls into the recession and the GDP is forecasted to decrease by $300mil. We know that the propensity to consume (c1) is 0.6. The government wants to fight the recession and it is considering either a massive spending boost or a new tax reformQuestion: By how much would the government spending need to increase to prevent the $300mil decrease in output?(Report your answer in millions. For example, if your answer is $550mil, write down...

The Federal Reserve uses monetary policy to print money. create money. increase taxes. increase government spending....

The Federal Reserve uses monetary policy to print money. create money. increase taxes. increase government spending. force banks to loan money.

If a government has a budget deficit, it must Group of answer choices: decrease taxes. decrease...

If a government has a budget deficit, it must Group of answer choices: decrease taxes. decrease its expenditures. increase taxes. borrow in the loanable funds market.

1) A. Determine the impact of an increase in government spending of $9000 when the MPC...

1) A. Determine the impact of an increase in government spending of $9000 when the MPC is .75 ( show your work ) B. Determine the impact of an increase in taxes of $2400 when the MPC is .8 ( show your work ) C. Determine the net impact upon the nation's economy that results from a decrease in spending of $1600 and an increase in taxes os $3000 when the MPC is .9 ( show your work )

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