User Account

All Pages

Recessionary output gap or inflationary output gap

Assignment Help Macroeconomics
Reference no: EM133338412

The economy of IVAland is in short-run macroeconomic equilibrium. The current real output is $300 billion, and the full employment output is $200 billion. The marginal propensity to consume is 0.5.

1. Is the economy experiencing a recessionary output gap or an inflationary output gap? Explain.

2. Assume IVALands's government is considering taking action to close the output gap identified in part (a).

(i) Calculate the minimum change and indicate the direction of change in government spending required to shift the aggregate demand curve to close the output gap. Show your work.

(ii) If instead IVALand's government changes taxes without changing government spending, calculate the minimum change and indicate the direction of change in taxes required to shift the aggregate demand curve to close the output gap. Show your work.

3. Which fiscal policy action, changing government spending or changing taxes, is more effective in closing the output gap? Explain.

4. Assume instead IVALands's government decides not to take any policy action. Will short-run aggregate supply increase, decrease, or stay the same in the long run? Explain.

Reference no: EM133338412

Questions Cloud

How would probability of a personal laptop being stolen : When performing a risk assessment, how would you classify the likelihood or probability of a personal laptop being stolen?
Social security and medicare are pay-as-you-go plans : What do economists mean when they say Social Security and Medicare are "pay-as-you-go" plans? What are the Social Security and Medicare trust funds
Explain market failure : Explain market failure. What is government's role when market failure occurs? Explain why.
Explain how shifts in income and substitution effects : Explain how shifts in the income and substitution effects can help us understand these developments.
Recessionary output gap or inflationary output gap : Is the economy experiencing a recessionary output gap or an inflationary output gap? Explain.
How as a malware engineer would deliver malware to masses : Discuss how you as a malware engineer would deliver your malware to the masses. This discussion is a group forum to discuss how you would use social media.
How would you define market in economics sense of word : How would you define a "market" in the economics sense of the word? How can a price ceiling imposed on a particular product create a shortage?
Developing country with insecurity there is no food : Explain the best reason why you apply for a humanitarian visa in under developing country with insecurity there is no food.
What are the three goals of macroeconomics : What are the three main goals of macroeconomics? Explain why societies cannot make a choice above their production possibilities frontier

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd