Supply-side economics is the school of thought that advocates the use of A) monetary policy to stimulate long-run aggregate supply. B) fiscal policy to stimulate long-run aggregate demand. C) monetary policy to stimulate short-run aggregate demand. D) fiscal policy to stimulate long
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37. |
Supply-side economics is the school of thought that advocates the use of |
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A) |
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B) |
fiscal policy to stimulate long-run aggregate demand. |
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C) |
monetary policy to stimulate short-run aggregate demand. |
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D) |
fiscal policy to stimulate long-run aggregate supply. |
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- 1. The Fed's job in manipulating monetary policy is made harder by the fact that: A) monetary authorities do not have a good understanding of how monetary policy works. B) monetary policy is usually pulling the economy in the opposite direction from fiscal policy. C) the Fed has to operate in real time and information on recessions usually becomes available with a lag. D) monetary policy is hardly ever effective in influencing business fluctuations. E) the Treasury Department cannot accommodate every demand placed on it by the Fed. 2. Monetary policy will be less effective at offsetting A) drops in velocity B) decreasing dynamic aggregate demand C) negative supply side shocks D) increases in consumer confidenceQuestion 8 Which of the following are true about fiscal and monetary policy? There may be more than one answer. a) A change in tax policies can affect output in the long-run. b) A change in government purchases can affect output in the short-run. c) Since money supply can only affect prices, it can never affect output in the long-run. d) Since money supply can only affect prices, it can never affect output in the short-run.11) The economy is in an expansion, risking inflation. Which of the following lists contains things policymakers could do to try to slow the expansion? increase the money supply, decrease taxes, increase government spending decrease the money supply, increase taxes, decrease government spending increase the money supply, increase taxes, increase government spending increase the money supply, increase taxes, decrease government spending
- 9) Two neighboring countries - Tweedledee and Tweedledum - are experiencing high inflation, and they have different monetary and fiscal policy responses. a) Tweedledee's government is increasing government spending, while Tweedledums's Central Bank is increasing the federal funds rate. Explain which of the two policies may help stem inflation. b) How will Fiscal policy affect the labor market in Tweedledee if wages are downwardly rigid? Explain with a diagram. c) What do you expect will happen to the unemployment rate in Tweedledum given their monetary policy if wages are downwardly rigid? Explain with a diagram. d) What will be the impact on the labor market and inflation if the Tweedledum government increases spending there as well? e) Of these groups in Tweedledee, which would be happy or sad with the government policy? 1) ex-government employees who are retired and receive a pension, 2) students who have taken out loans for college from the government, 3) bank owners in Tweedledee.…Assume that the prevailing interest rate in this economy is 6%. If the central bank decides to reduce the interest rate to 4% then: (a) This is contractionary monetary policy action and the price of exports would increase; (b) This is expansionary monetary policy and exports would increase; (c) This is expansionary fiscal policy and imports will increase; (d) This is contractionary monetary policy and imports will decrease.35)Why is the 1982 recession called a textbook recession? Select one: a. The textbooks say inflation was not a problem in 1982 and Paul Volcker made a mistake by causing a recession b. The textbooks say that if inflation is too high then the Fed has to raise the interest rate to curb spending c. The textbooks say that if inflation is too high then the Fed must lower the interest rate to curb (decrease) spending d. The textbooks say that if inflation is too high then the Fed must do nothing
- The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. 1. Which of the following statements about the debate over stabilization policy are correct? Check all that apply. A)Opponents of active stabilization policy believe that significant time lags in both fiscal and monetary policy often exacerbate economic fluctuations. B)Opponents of active stabilization believe that active fiscal and monetary policies have no effect on aggregate demand. C)Advocates of active stabilization believe that automatic stabilizers have no effect on aggregate demand. D)Advocates of active stabilization believe that implementation lags for fiscal and monetary policy do not exist. 2. Which of the following are examples of automatic stabilizers? Check all that apply. A)The federal funds rate B)Corporate income taxes C) Personal income…I. Identification__________1. Shows combination of interest rates and the levels of output such that planned spending equals income.__________2. Monetary policy characterized by a decrease in money supply that results to a higher interest rate.__________3. Shows all combinations of interest rates and levels of income such that the demand for real balances is equal to the supply.__________4. It occurs when expansionary fiscal policy causes interest rates to rise, thereby reducing private spending, particularly investment.__________5. A policy on the regulation of the supply of money in the circulation.__________6. The policy of the government with regard to the level of government purchases, the level of transfers and the tax structures.II. Modified TRUE or FALSE: Write TRUE if the statement is correct and if the statement is false, choose the word or group of words that makes the statement false and write the correct word or group of words to make the statement correct.1. The lower the…14) During a period when economic growth is very strong and inflation rates are rising to uncomfortable levels, Federal Reserve policymakers might decide to pursue which type of monetary policy? 15) Which of the following pairs of terms is used to describe fluctuations in the economy? 16) During a contractionary phase of the business cycle which of the following most likely occurs? 17) Which of the following regulations prevent price gouging? 18) what does fiscal policy include?
- Addressing inflation using Fiscal and Monetary Policy tools. Scenario - The US economy is currently experiencing high rates of inflation. You have Fiscal and Monetary policy tools available to address this problem: A) To attack the problem of inflation you must select one Monetary Policy tool and one Fiscal Policy tool. Write down the name of your Fiscal Policy tool and your Monetary Policy tool. Think about the options through and write down your choices. Raising taxes will allow the problem of inflation to be solved much faster. The faster the smaller the multiplier. B)Please explain why you selected the tools that you selected and why you did not select the other choices? Do this for both monetary and fiscal policy tools! Specifically, explain what is so good about the tool you selected and what is not so good about the tools you did not select? Do this for both the Monetary Policy tool and the Fiscal Policy tool. The key here is to use some decision criteria in making your…Review the rubric to make sure you understand the criteria for earning your grade. Read the articles An Update on the Economy and Monetary Policy and Recent and Near-Term Fiscal Policy Write a five- to six-page paper answering the following regarding fiscal and monetary policy changes: Explain the key aspects of today’s monetary policy and how they are affecting GDP and aggregate demand/aggregate supply. Explain the key aspects of today’s fiscal policy and how they are affecting GDP and aggregate demand/aggregate supply. Are these policies being well coordinated today? In essence, are they both working in unison to address current economic conditions? Explain. What are these policies’ effects on aggregate supply and aggregate. Do understand they affect supply as well as demand. You must use a minimum of five sources for your research paper, at least three of which are scholarly. Use proper spelling, grammar, and APA formatting for your analysis paper. When you have completed your…a) Explain what happens to Money Demand when each of the following occurs: i, incomes rise; ii. the interest rate rises. b. Use the money market to explain why the aggregate demand curve slopes downward.