Elucidate how the price level will be affected

Reference no: EM1336903

1. Define transfer payments and give an example. Explain why transfer payments are not included in GDP.

2. Which components of GDP (C,I,G,X,M) would be affected by the following:
a. You buy a pizza.
b. You buy a new house.
c. Tennessee resurfaces Interstate 40.
d. You buy a Lamborghini.
e. You buy a new stove.

3. The federal government has recently enacted several large spending bills (i.e. "economic stimulus.") Use the Modern Keynesian aggregate supply and demand system to tell which curve(s) shift and in which direction. Explain how the price level will be affected by these expenditures in the short-run. Explain how GDP is affected in the long-run.

4. Conduct the same exercise as in #3 using the Classical model. Explain how the price level will be affected by these expenditures in the short-run. Explain how GDP is affected in the long-run.

5. Compare your results from #3 and #4. Are the results different? Explain.

6. Why would it be important for a policy maker to understand these two major theories of economics?

Reference no: EM1336903

Questions Cloud

Create a method that will perform the a division operation : Write down a method that will perform the a division operation (divide by) on the numbers passed to it in two variables (numerator, denominator) and outputs the results. Use a try-catch pair to output an error message if the illegal operation of d..

Project form economic or strategic standpoint : Project absolutely makes sense to do from either an economic or strategic standpoint.

Mutual of chicago insurance company : Robert Balik and Carol Kiefer are senior vice presidents of the Mutual of Chicago Insurance Company. They are co-directors of the company's pension fund management division-Write down a formula that can be used to value any stock, regardless of it..

Find an instance method whenever the method is called : A ____ reference is an automatically created variable that holds the address of an object and passes it to an instance method whenever the method is known.

Elucidate how the price level will be affected : Elucidate how the price level will be affected by these expenditures in the short-run. Explain how GDP is affected in the long-run.

Suitable punishment for violation of ethical-legal principle : What is the appropriate punishment for violation of ethical and legal principles? Should the remedies be limited to expulsion of the members who violated those principles or should the entire community be held responsible?

Strategic competitive advantage : Discuss the available resources to gain a strategic competitive advantage.

At which point if should the government regulate promotion : Explain why is the "1 free" free to the buyer but not to society. At which point if any should the government regulate such promotions like these.

Explain devising marketing mix : Explain Devising Marketing mix and Explain the components of the marketing mix for Kudler's new catering service

User Account

All Pages