Fiscal policy measures for economy operating

Assignment Help Macroeconomics

Reference no: EM1315260

You are an aide working for a policy maker (like a Senator Marilyn Pugh in the U.S.) in your country. You have been asked to analyze the economy, determine if there are any problems, and to make policy recommendations. You are to report to the policy maker in a policy paper. Your group leader will be responsible for entering the group paper in the document area. (You may select your own group leader.) You have gathered information statistics about the economy and this is what you have found.

Population= 300 million
Labour Force= 160 million
Unemployed= 12 million
Structural Unemployment rate= 2%
Frictional Unemployment rate= 3%
GDP Deflator 2007= 170
GDP Deflator 2008= 176.8 (The GDP deflator is the price index for the entire economy.)
Full Employment Real GDP= $6,000 billion
Equilibrium Real GDP= $5,880 billion
MPC= .75

1. What is the problem with the economy? Back your answer up with statistics. (You will not get very many points for merely identifying the problem. The real points come from substantiating your answer).

2. What are two possible fiscal policy solutions for the problem? Using a Keynesian approach, you should be able to get numerical solutions. More points are given for numerical solutions.

3. What cautions should you give the policy maker about these potential solutions? (In other words are there some undesirable side-effects?)

Reference no: EM1315260

Questions Cloud

Texaco had indeed violated antitrust law : In 1990, the Supreme Court of the United States found which Texaco had indeed violated antitrust law. Which law do you think Texaco was found guilty of violating.

Hypotheses test-equality of two means : He would like to determine whether there are more units produced on the afternoon shift than on the day shift.

Assume that the 60.0 ft path is a straight line : A good baseball pitcher can throw a baseball toward home plate at 91 miles per hour with a spin of 1789 revolutions per minute. How many revolutions does baseball make on its way to home plate? For simplicity, assume that the 60.0 ft path is a straig..

Equilibrium price of coffee mugs rose : The equilibrium price of coffee mugs rose sharply last month, but the equilibrium quantity was the same as ever.

Fiscal policy measures for economy operating : What are two possible fiscal policy solutions for the problem? Using a Keynesian approach, you should be able to get numerical solutions. More points are given for numerical solutions.

Hypotheses test for equality of two means : A sample of 40 decaffeinated-coffee drinkers showed a mean of 5.84 cups per day, with a standard deviation of 1.36 cups per day. Use the .01 significance level. Compute the p-value.

Finding plausible value for correlation : Find out a plausible value r for correlation between vehicle weight and miles per gallon (mpg) shown in the scattergram below?

The initial total mechanical energy of the projectile : What is the speed of projectile immediately before it hits the ground if air friction does one and a half times as much work on projectile when it is going down as it did when it was going up.

If the countries split the market evenly : If the countries split the market evenly, Illustrate what would be South Africa's production also profit

User Account

All Pages