-why is fiscal policy important in these topics? 1. cash for clunkers 2. crowding out 3. Longterm impacts of deficit spending 4. Ricardian Equivalence theoreom -How much Gov. pay? -why fiscal policy used? -why was it successful?
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response that correlates a country's financial health to its citizens' financial health. Provide an analysis of data related to personal, corporate, or governmental decisions and the effects of these decisions on individual, family, or community spending. Provide at least two resources that support your analysis.
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1. Given an economy with the initial condition of 0% inflation and 15% unemployment.
a. Illustrate the initial condition using the Aggregate spending model (a.k.a.
Aggregate Demand and Aggregate Supply graph). What gap are we
experiencing? Draw the graph, label it carefully.
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500 words essay on the question - "Using the extended ISLM model, explain how higher government spending will impact private investment when the LM curve is vertical, compared to when it is horizontal. What are the implications of fiscal policy in these two extreme cases? "
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Show the impact of expansionary fiscal policy on a graph and in words in the AD-AS model.
If the government continues to increase government spending even after the natural rate of employment is reached, what happens in the AD-AS model. Eventually, what is the price level and employment level.
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The retail store Macy's is closing a bunch of stores. How does the store closures affect employees? How do these factors affect wages and spending? How do these factors affect the demand curve? Will these factors cause the curve to move or shift? Explain.
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1. If the multiplier is 5 and a change in fiscal policy leads to a $500 million decrease in total spending, we can conclude that:
A) Government spending decreased by $500 million.
B) Taxes increased by $500 million.
C) Taxes decreased by $100 million.
D) Government spending decreased by $100 million.
2. Which of the following shifts, ceteris paribus, will cause an increase in both unemployment and inflation?
A) An increase in aggregate demand. C) An increase in aggregate supply.
B) A decrease in aggregate demand. D) A decrease in aggregate supply.
3. Given that autonomous consumption equals $1000, income equals $20,000, and the MPC equals 0.90, the level of:
A) Saving equals $4,000. C) Consumption equals $17,000.
B) Consumption equals $19,000. D) Consumption equals $16,000.
4. Assume the MPC is 0.80. The change in GDP because of an increase in Government spending of $150 billion would be:
A) $75 billion. B) $150 billion. C) $600 billion. D) $750 billion.
5. How might macroeconomic equilibrium be affected by the following events. Describe in words or draw a well labeled diagram.
a) a stock market crash b) the election of a new president
c) severe food crop failures in Canada d) a spike in oil prices
Complete the following table:
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Real Output Demanded (in $ billions) by: |
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Price Level |
Consumption |
Investment |
Government |
Net Exports |
Agg’t Demand |
Agg’t Supply |
|
140 |
90 |
50 |
50 |
6 |
300 |
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|
130 |
100 |
70 |
50 |
10 |
270 |
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120 |
110 |
80 |
50 |
10 |
250 |
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|
110 |
150 |
108 |
50 |
12 |
230 |
|
|
100 |
170 |
110 |
50 |
14 |
200 |
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a) What is the equilibrium level of GDP?
b) What is the equilibrium price level?
c) If full employment occurs at real GDP = $230 billion, what kind of GDP gap exists?
d) How large is that gap?
e) Which macro problem exists here?
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Graph #3
Economic Impact: The U.S. Government cuts defense spending.
Question 37 (1 point)
Saved
What change will occur in the graph of the economy due to this impact?
Question 37 options:
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SRAS shifts Left |
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AD shifts Right |
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SRAS shifts Right |
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AD shifts Left |
Question 38 (1 point)
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What is the “state” of the economy caused by the cut in defense spending?
Question 38 options:
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Recessionary Gap |
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Long-run Equilibrium |
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Inflationary Gap |
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None of the Above |
Question 39 (1 point)
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What does the graph show happening to the short run price level immediately following the cut in defense spending, ceteris paribus?
Question 39 options:
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The price level rises |
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The price level remains unchanged |
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The price level falls |
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There is not enough data to answer this question |
Question 40 (1 point)
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Select the correct series of steps through which the economy will self-regulate after the cut in defense spending:
Question 40 options:
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Consumption rises, shifting AD to the right until the economy returns to long-run equilibrium |
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Wage rates rise, shifting SRAS to the left until the economy returns to long-run equilibrium |
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Consumption falls, shifting AD to the left until the economy returns to long-run equilibrium |
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Wage rates fall, shifting SRAS to the right until the economy returns to long-run equilibrium |
Question 41 (1 point)
Saved
Monetary policy advocates would recommend which of the following actions to alleviate the economic state?
Question 41 options:
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Wait for the wage rate to fall, allowing the economy to grow on it’s own |
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Practice contractionary monetary policy, slowing growth in the economy |
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Wait for the wage rate to rise, allowing the economy to slow on it’s own |
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Practice expansionary monetary policy, promoting economic growth |
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The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) Created with Raphaël 2.1.2DemandSupplyINTEREST RATE (Percent)LOANABLE FUNDS (Billions of dollars)Demand Supply Created with Raphaël 2.1.2 Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is a decrease in the tax rate on interest income, from 20% to 15%. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to selector 1
Points: Close Explanation Explanation: Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve on the graph to reflect this change. The repeal of the previously existing tax credit causes the interest rate to selector 1
Points: Close Explanation Explanation: Scenario 3: Initially, the government's budget is balanced; then the government responds to the conclusion of a war by significantly reducing defense spending without changing taxes. This change in spending causes the government to run a budget selector 1
Points: Shift the appropriate curve on the graph to reflect this change. This causes the interest rate to selector 1
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