PROBLEMS AND APPLICATIONS

Economics Assignment Help Online

PROBLEMS AND APPLICATIONS 1. Explain how each of the following developments would affect the supply of money, the demand for money, and the interest rate. Illustrate your answers with a diagram. a. The Federal Reserve raises the discount rate b. A wave. of consumer pessimism reduces aggregate demand c. Banks begin to pay interest on all […]

QUESTIONS FOR REVIEW

Economics Assignment Help Online

QUESTIONS FOR REVIEW I. ‘hat is the theory of liquidity preference? How does it help ‘explain the downward slope of the aggregate-demand curve? 2. Use the theory of liquidity preference .to explain how a decrease in. the money supply affects the aggregate-demand 3. The government spends $3 billion to buy police cars. ‘Explain why aggregate demand might […]

CONCLUSION

Economics Assignment Help Online

CONCLUSION Before policymakers make any change in policy, they need to consider all the effects of their decisions. Earlier in the book, we examined classical models of the economy, which describe the long-run effects of monetary and fiscal policy. There we saw how fiscal policy influences saving, investment, and long-run growth and how monetary policy influences the price […]

AUTOMATIC STABILIZERS

Economics Assignment Help Online

AUTOMATIC STABILIZERS All economists-both advocates and critics of stabilization policy-agree that the lags in implementation render policy less useful as a tool for short-run stabilization. The economy would be more stable, therefore, if policymakers could find a way to avoid some of these lags. In fact, they have. Automatic stabilizers are changes in fiscal policy that stimulate aggregate […]

THE CASE AGAINST ACTIVE STABILIZATION POLICY

Economics Assignment Help Online

THE CASE AGAINST ACTIVE STABILIZATION POLICY Some economists argue that the government should avoid active use of monetary and fiscal policy to try to stabilize the economy. They claim that these policy instruments should be set to achieve long-run goals, such as rapid economic growth and low inflation, and that the economy should be left to deal […]

KEYNESIANS IN THE WHITE HOUSE

Economics Assignment Help Online

KEYNESIANS IN THE WHITE HOUSE When a reporter in 1961 asked President John F. Kennedy why he advocated a tax cut, Kennedy replied. “To stimulate the economy. Don’t you remember your Economics 101?” Kennedy’s policy was, in fact. based on the analysis of fiscal policy we have developed in this chapter. His goal was to enact a […]

THE CASE FOR ACTIVE STABILIZATION POLICY

Economics Assignment Help Online

THE CASE FOR ACTIVE STABILIZATION POLICY Let’s return to the question that began this chapter: When the president and Congress cut government spending, how should the Federal Reserve respond? As we have seen, government spending is one determinant of the position of the aggregate-demand curve. When the government cuts spending, aggregate demand will fall, which will depress production […]

USING POLICY TO STABILIZE THE ECONOMY

Economics Assignment Help Online

USING POLICY TO STABILIZE THE ECONOMY We have seen how monetary and fiscal policy can affect the economy’s aggregate demand for goods and services These theoretical insights raise some important policy questions: Should policymakers use these instruments to control aggregate demand and stabilize the economy? If so, when? If not, why not? Get Any Economics Assignment […]

CHANGES IN TAXES

Economics Assignment Help Online

CHANGES IN TAXES The other important instrument of fiscal policy, besides the level of government purchases, is the level of taxation. When the government cuts personal income taxes, for instance, if increases households” take home pay. Households will save some of this additional income, but they will also spend some of it on consumer goods. Because it increases […]

OTHER APPLICATIONS OF THE MULTIPLIER EFFECT

Economics Assignment Help Online

OTHER APPLICATIONS OF THE MULTIPLIER EFFECT Because of the multiplier· effect, a dollar of government purchases can generate more than a dollar of aggregate demand. The logic of the multiplier effect, however, is not restricted to changes in government purchases. Instead, it applies to any event that alters spending on any component of GDP–consumption, investment, government purchases, or […]