Keynesian fiscal policy, Macroeconomics

Assignment Help:

Assume the economy has a GDP of $11,500 billion.  The unemployment rate is at 7.3% and has been slowly rising for the last 6 months.  Inflation was at 2.3% one year ago but has since dropped to near 0%.  The MPC in the economy is .75 and the Natural Rate of Unemployment is 5.0%.

a.   What problem is the economy currently facing?

b.   Is the problem serious enough that government should act to solve it?

c.   If the government does decide to act, what size government expenditure would fix the problem

d.   What size tax change would fix the problem?

e.   Why would it be better for government to solve the problem using government purchases (part c above) rather than taxes (part d above) to solve the problem?

f.    Assuming that government does decide to use the tax policy, what could happen to cause the policy to be ineffective?

 


Related Discussions:- Keynesian fiscal policy

Factors you would examine in your research, Identify a generic organization...

Identify a generic organization (e.g., manufacturing plant, hospital, educational institution). You will use this same organization in your Final Project. Assume that you are part

Fiscal restraint is required, If the AD excess is $300 billion and the MPC ...

If the AD excess is $300 billion and the MPC is 0.8 how much fiscal restraint is required? What does the "debt held by the public" mean?

Traditional or a roth ira, Suppose one of your clients is four years away f...

Suppose one of your clients is four years away from retirement and has only $1,500 in pretax income to devote to either a Roth or a traditional IRA. The traditional IRA permits inv

National income, farmer grows a bushel of wheat & sells it to a miller for ...

farmer grows a bushel of wheat & sells it to a miller for Rs. 1.00. The miller turns the wheat into flour & then sells the flour to a baker for RS. 3.00. The baker uses the flour

Quiz, To overcome the stagnant growth it was experiencing for the past 10-1...

To overcome the stagnant growth it was experiencing for the past 10-15 years, Japan undertook which of the following measures? Answer Undertook programs to build infrastructure

Marginal propensity to save, Marginal Propensity to save  (MPS)  is the r...

Marginal Propensity to save  (MPS)  is the ratio of change in total saving to change in total disposable income. Symbolically,     MPS = ?S/?Y For example, total

Consumer Price Index, What is the formula for consumer price index?

What is the formula for consumer price index?

Tax credit, Suppose that an investment tax credit is stated to be temporary...

Suppose that an investment tax credit is stated to be temporary in nature, and the credit will be 10% on newly acquired capital (investment) equipment and will last just one year o

Rate of inflation, 2. Given the following information: Consumers are very o...

2. Given the following information: Consumers are very optimistic about the future. The price of oil has just doubled. The money supply is growing at a 6% rate. The government has

Write Your Message!

Captcha
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!

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