f the Mexican government pursues expansionary fiscal policy in response to the recession, what will happen to aggregate Memand and aggregate supply in Mexico in the short run? Aggregate demand Short-run aggregate supply decreases decreases Aggregate demand Short-run aggregate supply increases decreases Aggregate demand Short-run aggregate supply decreases increases Aggregate demand Short-run aggregate supply increases increases

f the Mexican government pursues expansionary fiscal policy in response to the recession, what will happen to aggregate Memand and aggregate supply in Mexico in the short run? Aggregate demand Short-run aggregate supply decreases decreases Aggregate demand Short-run aggregate supply increases decreases Aggregate demand Short-run aggregate supply decreases increases Aggregate demand Short-run aggregate supply increases increases

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 5P

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explanation. Be sure to exp Assume the United States has been in another recession for the past 10 months. Unemployment is 10% and GDP has dropped $1.9 trillion from its previous peak of $ 20.8 trillion. The housing and heavy equipment industries have been hit the hardest. Inflation has been near the 2% target but has started to dip below. Also, the countries average MPC is 60. Determine the best fiscal policy/strategy to help the economy recover and explain why it is the best choice. Be sure to reference Aggregate Demand and Aggregate Supply and explain your specific tools in your answers. Calculations Explanation Graph (More space for the explanation on the back)
Explain, using the AD‐AS model, how the South African Government can use fiscal policy as a tool to recover from the negative effects of this COVID‐19 pandemic.Your answer must include the following:The description of the type of fiscal policy requiredAn explanation of how the implementation of this tool will work their waythrough the economy to achieve the desired effect;The AD‐AS graph showing the implications of your recommendations.
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 changing taxes to reduce the burden of this recession. Fiscal Policy Price Level 140 130 120 110 100 90 80 70 60 50 LRAS $ AS AD₁ 40 0 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) billion AD Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ b. If the MPC is 0.6, how much do taxes need to change to shift aggregate demand by the amount you found in part a? billion Suppose instead that the MPC is 0.92 c How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by S billion and taxes need to change by $[ billion.
Suppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that a long strike by coal miners reduces the coal supply and increases the price of coal. Show the effects on your graph and label the new equilibrium point "2." Lastly, suppose our government wants the economy to return to full-employment as quickly as possible. Should the government intervene? If so, show the impact of successful fiscal policy on your graph. Label this new equilibrium point "3."
The President of Westeros hires you as an economic consultant. He is concerned that theoutput level in Westeros is too high and that this will cause prices to rise. He feels that it isnecessary to reduce output by $10 billion. He tells you that the MPC in Westeros is 0.6.Which of the following would be the best advice to give to the Westeros president?A) reduce government purchases by $4 billionB) increase taxes by $10 billionC) reduce government purchases by $10 billionD) increase taxes by $2.5 billion
Of the four choices below, which causes a shift in the Supply of dollars to the right? A. An expansionary fiscal policy that raised U.S. income and increased U.S. imports.B. An expansionary fiscal policy that raised U.S. income and reduced U.S. imports.C. A contractionary fiscal policy that reduced U.S. income and lowered U.S. imports.D. A contractionary fiscal policy that reduced U.S. income and increased U.S. imports.
Q.1.4 Which of the following statements about Fiscal Policy is INCORRECT? (2)(a) In order to combat inflation, the South African Reserve Bank must apply acontractionary 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 theAD‐AS model.
The graph shows the income-expenditure model for the country of Mireland, where AE represents aggregate expenditure. The Mirsh government wants to cut spending owing to a huge budget deficit and, as such, decides to reduce infrastructure spending by $11 billion. Show the impact of this spending cut given a marginal propensity to consume (MPC) of 0.6 and a total tax take of one-quarter in any changes in GDP. In this example, assume that there is no international trade or inflation, and that interest rates are fixed. Planned aggregate spending (in billions of dollars) 70 65 60 55 50 45 40 35 30 25 20 15 10 5 45 degree line Planned AB A new government is elected in Mireland and decides to make even deeper cuts in direct spending, totaling $14 billion. What will be the total change in real GDP? Please provide answer to the nearest whole billion. total change in real GDP: $ 5 Incorrect billion
Expectation in Fiscal policy & Ricardian equivalence. One can argue that macroeconomics is essentially a story of a 'journey' from disequilibrium back to equilibrium. The recession caused by Covid that had forced many countries to use fiscal policy to compensate the shock and stimulate the economy is one example of disequilibrium. Cited from the Ministry of Finance website, the use of the government budget to mitigate the impact of the Covid crisis was clearly stated: "The state budget will continue to work hard to protect the community through Covid 19 handling from a health perspective, especially during the implementation of the Emergency Community Activity Restrictions (PPKM). This refocusing and sharpening of priorities is expected to help all communities in various sectors, especially the health sector, in dealing with Emergency PPKM." (MOF-RI News Index, 7/5/2021). Questions: a. Based on the macro workhorse model, explain the 'journey' (mechanism) how an initial disequilibrium…
Suppose that you are a member of the Council of Economic Advisers. The president has asked you to prepare a statement on the question, "What is the proper fiscal policy for the next 12 months?" Pre-pare such a statement, indicating (a) the current state of the economy (that is, the unemployment rate, growth in real income, and rate of inflation) and (b) your fiscal policy suggestions. Should the budget be in balance? Explain the reasoning behind your suggestions.
- Assuming that there is no government spending or trade, an economy’s GDP is the sum of domestic consumption C and investment I, i.e. Y = C+ I- Assume that I is unaffected by GDP- Assume the consumption function is C = c + c Y- In any equilibrium aggregate demand, AD must be equal to Y, GDP. Which NINE of the following statements are correct? a. The aggregate demand equation is given by AD = c + c Y + I b. c is equal to autonomous consumption c. if c is a number between 0 and 1, and I+c >0 then the aggregate demand equation is a straight line that must intersect the 45 degree line at some point. d. In a demand-driven economy the AD curve is a vertical line e. In a demand-driven economy demand is equal to supply in equilibrium f. In a supply-driven economy demand is equal to supply in equilibrium g. In a demand-driven economy, supply creates its own demand h. If the economy above is a demand-driven economy, then the equilibrium solution for Y is given by Y= c + c + I i. If…
1. Provide a written conclusion on Fiscal Policy?