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ECO 2013 Principles of Macroeconomics Online
Assignment
Instructions: Provide your name, Panther ID, and the date on a sheet of paper. Answer all of the questions below. Show all your reasoning, work, steps, methodologies, tables, and graphs used to get your answers in order to get full credit. Upload your finished document and file into the Assignment Dropbox for the appropriate assignment in Canvas (a .pdf file is strongly preferred).
Question 1:
Suppose that the empire of Arendelle is in a recession. Queen Elsa is looking for advice on what to do in order to bring about economic stability. You are her chief advisor and want to provide her with some guidance.
a) What type of fiscal policy do you suggest she should she pursue? Give the three main ways she can achieve this policy as discussed in lecture.
b) Suppose one group of policymakers wants to offer a tax rebate in the sum $600 million (i.e. reduce taxes) while another group wants to increase government spending by $600 million. If the marginal propensity to consume is 0.50, which policy will introduce more spending and income into the economy? Provide your reasoning to the Queen (i.e. show how equilibrium income is affected with both of these policies using specific numbers and mechanisms.)
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