The Obama administration (as the previous Bush administration did) stated that the stimulus package would increase employment and successfully pull the economy out of the recession. However, unemployment remained high for some time even after the second stimulus package was approved. Discuss whether this implies that stimulus packages are completely useless to affect aggregate output.
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- Analyze fiscal policy in order the generate macroeconomic stability. Which kind of economic measures do you recommend at the current economic situation which is characterized as a stagflation situation? (use graphs)From 2008, how might monetary policy (as reflected in the OCR) have affected the degree of crowding out resulting from fiscal policy (as reflected in government expenditure)?The use of government purchases (G) as a fiscal policy tool can have an effect on long-run growth in the economy. Under what circumstances might an increase in G cause the level of potential output (Y*) to increase? A. If the increase in G causes a permanent increase in the marginal propensity to consume, which causes a permanent rightward shift of the AD curve. B. If the increase in G is offset by an equal decrease in C, I, and NX. C. If the increase in G crowds out private investment. D. If the increase in G leads to a permanent increase in the level of autonomous saving in the economy. E. If the increase in G is spent on public infrastructure that increases the productivity of private-sector production.
- Which of the following statements about Fiscal Policy is INCORRECT (a) In order to combat inflation, the South African Reserve Bank must apply a contractionary fiscal policy; (b) A contractionary fiscal policy can result in higher levels of unemployment; (c) Expansionary fiscal policy will increase the budget deficit; (d) The application of fiscal policy will have no effect on aggregate supply in the AD‐AS model. If the inflation rate is 6% and Susan receives a 6% increase in income, then, over the year, Susan’s: (a) Real and nominal income both remain unchanged; (b) Real and nominal income both rise; (c) Real income rises but nominal income remains unchanged; (d) Nominal income rises but real income remains unchanged. Given the import function, Z = 300 + 2/3Y, which of the following statements is correct? The marginal propensity to save is 1/3; The induced component is 300; 2/3 is the proportion of any income spent on imports; None of…The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Price Level 160 140 120 100 80 60 $ 40 20 0 Fiscal Policy LRAS AD₁ Real GDP (billions of dollars) billion AS 80 160 240 320 400 480 560 640 720 800 AD Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion O b. If the MPC is 0.8, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? Suppose instead that the MPC is 0.9. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.Refer to the information provided in Figure below to answer the question that follow. AS Price level, P AD, AD, AD AD, AD, AD Aggregate output (income), Y Refer to Figure An expansionary fiscal policy would be least effective in raising output with little or no inflation when the aggregate demand curve shifts from Select one: a. AD1 to AD2. b. AD5 to AD6. C. AD3 to AD4. d. AD1 to AD6.
- The CARES Act was the largest in both nominal and real measures of fiscal relief/stimulus passed in U.S. history. The package will cost $2 trillion as it stabilizes consumer spending during a period of unprecedented unemployment. Simultaneously, the global pandemic caused a supply-side shock as supply chains experienced delays as households stock up on basic necessities. In terms of aggregate demand and aggregate supply, explain if the CARES Act would cause a significant rise in prices?This exercise points to a clear policy dilemma. A fiscal contraction may have desirable long-run effect on output and living standards, but the short-run effects are output and gap.Hide student question Time Left : Determine whether each of the following is an example of a situation in which a direct expenditure offset to fiscal policy occurs. a. In an effort to help rejuvenate the nation's railroad system, a new government agency buys unused track, locomotives, and passenger and freight cars, many of which private companies would otherwise have purchased and put into regular use. b. The government increases its expenditures without raising taxes. To cover the resulting budget deficit, it borrows more funds from the private sector, thereby pushing up the market interest rate and discouraging private planned investment spending. c. The government finances the construction of a classical music museum that otherwise would never have received private funding.
- from the news article (https://foreignpolicy.com/2020/09/16/coronavirus-covid-economic-impact-recession-south-korea-success/) Q1. South Korea announced stimulus package early on, in April. Use Aggregate demand and Supply diagram to show how the stimulus package must have worked? Q2. What is multiplier? How does it work? Do you think it worked in South Korean Case?https://www.usatoday.com/in-depth/news/2021/03/10/covid-19-stimulus-bill-joe-bidens-plan-explained-6-graphics/4601454001/ read the article and answer the following questions Now describe the anticipated impacts of the Biden Covid Bill. Remember, the focus is only on one side of the equation: is it Agg. Demand or Agg Supply? Please be specific with provisions in the bill and anticipated impacts on the economy (affecting C, G, Net X or I).14. Crowding out On the following graph, AD₁ represents the initial aggregate demand curve in a hypothetical economy, and AS represents the initial aggregate supply curve. The economy's full-employment output is $12 trillion. On the following graph, use the grey point (star symbol) to mark the equilibrium. (Note: You will not be graded on any adjustments made to the graph.) PRICE LEVEL (CPI) 106 105 104 103 102 101 100 99 98 97 96 6 7 8 1 1 1 11 AS AD₁ Full Employment 9 10 11 REAL GDP (Trillions of dollars) 12 13 14 15 AD₂ AD 3 16 Equilibrium ?