In a closed economy, in the short-run fiscal is more effective at decreasing unemployment, when: none of the the other options is correct. government spending is cut by more O the central bank is targeting output O either the marginal propensity to consume is smaller and/or the real interest rate sensitivity of investment is smaller O the central bank is targeting the real interest rate O either the marginal propensity to consume is smaller and/or the real interest rate sensitivity of investment is larger autonomous consumption is larger O larger tax increases are used autonomous investment is larger

In a closed economy, in the short-run fiscal is more effective at decreasing unemployment, when: none of the the other options is correct. government spending is cut by more O the central bank is targeting output O either the marginal propensity to consume is smaller and/or the real interest rate sensitivity of investment is smaller O the central bank is targeting the real interest rate O either the marginal propensity to consume is smaller and/or the real interest rate sensitivity of investment is larger autonomous consumption is larger O larger tax increases are used autonomous investment is larger

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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1Why low rate inflation is considered necessary for economic grwoth? Oa It does not affect the purchasing power of wages Ob. It indicates that the currency is in continuous demand by the people Oc taffects only the rich and not the poor Od itact as an incentive to boost in supply in the economy 2When the economy is in Keynesian macroeconomic equilibrium, planned investment is greater than actual investment. O a False O b. True 3Government fixes the floor and ceiling price which will not allow the producers to increase the price on their wish, this is a type of. O a Physical control called price pegging O b. Monetary policy control measures O. Physical control called price tagging Od. Fiscal policy control measures O e None 4Rising output coupled with falling prices is called stagflation O a. False O b. True 5The Value of marginal propensity to consume lies O a. O to 1 O b. Less than zero Oc -1 to 1 Od. Between O to 1 6The Central Bank way to control inflation is Oa Monetary policy…
If the marginal propensity to consume is 0.75, byhow much would government spending have to rise toincrease output by $1,000 billion? By how muchwould taxes need to decrease to increase output by$1,000 billion?
19. Which of the following statements concerning Keynesian analysis are true? Select one: a. Keynes's analysis started with the recognition that the total quantity demanded of an economy's output was the sum of three types of spending: consumer expenditure, planned investment spending, and government spending. Ob. Keynes recognized that equilibrium would occur in the economy when planned expenditure equals Actual expenditure O c All of the above are true. d. Keynes's analysis involves explaining why aggregate output is at a certain level by understanding what factors affect each component of aggregate demand and how the sum of these components could add up to an output smaller or greater than the economy is capable of producing
Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result. Real GDP Consumption PlannedInvestment GovernmentPurchases Net Exports $9,000 $7,800 $1,500 $1,000 -$700 $10,000 $8,600 $1,500 $1,000 -$700 $11,000 $9,400 $1,500 $1,000 -$700 $12,000 $10,200 $1,500 $1,000 -$700 $13,000 $11,000 $1,500 $1,000 -$700 $14,000 $11,800 $1,500 $1,000 -$700 (a) What is the equilibrium level of real GDP in this economy? (b) Compute the marginal propensity to consume. (c) Compute the government expenditures multipler. (d) Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?
Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result. Real GDP Consumption PlannedInvestment GovernmentPurchases Net Exports $9,000 $7,800 $1,500 $1,000 -$700 $10,000 $8,600 $1,500 $1,000 -$700 $11,000 $9,400 $1,500 $1,000 -$700 $12,000 $10,200 $1,500 $1,000 -$700 $13,000 $11,000 $1,500 $1,000 -$700 $14,000 $11,800 $1,500 $1,000 -$700 (d) Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?
Look at Figure 3. Assume this aggregate demand diagram represents an economy with government, where: a = exogenous consumption b = the marginal propensity to consume t = the tax rate |= investment G = government spending Y = income Figure 3 Aggregate AD, demand AD, 45° Income Select the option that describes a possible scenario shown by the shift from AD, to AD, in Figure 3. Select one: O Rise in tax rate and rise in government spending. O Rise in tax rate and fall in government spending. O Fall in tax rate and fall in government spending. O Fall in tax rate and rise in government spending. ( Previous page Next page > PHILIPS
Help The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that Multiple Choice an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP a decrease in the price level shifts the aggregote expenditures schedule downward and decreases real GDP a decreose in the price level shifts the aggregate expenditures scheduie upiward and decreases real GDP an increase in the price level shifts the eggregate expenditures schedule downverd and decreases real GDP
Suppose the multiplier has a value that exceeds 1, and there are no crowding out or investment accelerator effects. Which of the following would shift aggregate demand to the left by more than the increase in expenditures? A. an decrease in government expenditures B. an decrease in net exports O O C. an decrease in investment spending D. All of the above are correct.
We found that for every $1 increase in G there is a multiplied impact on output with, in the most 1 basic model, a multiplier of A study by economists at the New York Fed conducted 1- MPC during the COVID-19 recession found that "as of the end of June 2020, a relatively small share of stimulus payments-ljust] 29 percent-was used for consumption." What is the G multiplier based on that estimated MPC and the formula from the basic model?
Consider the impact of a cut in the interest rate set by the central bank (the "policy rate"), which causes banks to lower interest rates for both borrowers and lenders. Select one or more: U a. Borrowers like Julia will definitely be better off O b. Borrowers like Julia will definitely increase their current consumption O c. If Marco is a saver (not an investor) he will definitely be worse off O d. If Marco is a saver he will definitely decrease his consumption
The Life-Cycle/Permanent Income Model of Consumption makes a different prediction from the Keynesian Model, about how Consumption reacts to an increase in current income. Which of the following is the best description of the difference? O In the Keynesian Model, consumers will increasktheir spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will not increase their spending by much unless they believe that the increase in their income is permanent. O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc times the increase in income. In the Keynesian Model, consumers will only increase their spending if they believe that the increase in their income is temporary. O In the Keynesian Model, consumers will increase their spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will only increase their spending if they believe that the increase in their income…
If consumption is C=100+0.75Yd Taxes is T=50+0.5Y Export is X=200 Import is M=50+0.25Y Government spending is G=150 Investment is I=200 Usethemultiplierapplicabletoexport,toexplainhowa100–billiondeclineindemand forexportcouldaffecttheeconomy’s: (i) Balanceofpayment