a. Based on the macro workhorse model, explain the 'journey' (mechanism) how an initial disequilibrium can revert to equilibrium by using fiscal policy. b. Some argue that in the medium run, the expansionary effect of fiscal stimulus disappears, bringing the output back to the initial level (the phenomenon of 'Ricardian equivalence'). Explain the mechanism of the Ricardian fiscal policy.
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- Determine how each of the following monetary or fiscal policy would shift the aggregate demand curve. Illustrate and explain the following effect. a. Assuming the economy is currently producing above the full employment output, the government decided to increase the personal income tax as a form of contractionary fiscal policy. Illustrate and explain the effect of the policy using AD-AS curve. b. With the recession due to COVID-19, the central bank has decided to lower down discount rates and reserve requirements of the commercial bank. Illustrate and explain the effect of the policy using AD-AS curve.Course: Macroeconomic - IS-LM Model Prove mathematically the following: Given an increase in the proportional tax on income(t), what happens to the level of output and to the tax?" . Hint: for demostration, use the IS general function for a closed economy Y = C + I + G, where C = a + c*YD and YD = Y + TR - Y*t (where t = proportional income tax) and realize changes i.e., from "t1" to "t2"a. In the textbook, you read that Tyler does not save and planaccording to the theory of Ricardian equivalence but Alex is moreof a “Ricardian.” In light of this, who probably cuts back theirspending the most when taxes temporarily rise: someone like Tylerwho is not “Ricardian” or someone like Alex who is?b. If the U.S. government wants to use fiscal policy to shift ADaround easily, which one would the U.S. government prefer tomake more copies of: Tyler or Alex?
- Explain fiscal policy and give an exmple of how it could be applied to the current COVID situation in the United States.SRAS PL AD2 AD Y, Y2 REAL GDP The Aggregate Demand Model shows an increase in Aggregate Demand or GDP, Which type of Fiscal Policy was used and why? O Contractionary Policy to increase GDP and Increase Inflation O Contractionary Policy to decrease GDP and lower the unemployment rate O Expansionary Policy to raise GDP and lower the unemployment rate O Expansionary Policy to raise GDP and lower Inflation PRICE LEVELP PE ж LRAS YN SRAS AD Y Consider the graphfor this and the next two questions. Assume the following graph depicts the situation in the US right before the financial crisis that recently engulfed the USA. Which curve would you shift in the graph to explain the initial impact of the financial crisis? Indicate the new position of the economy and what it implies. Prescribe a fiscal policy (contractionary or expansionary) policy you will use to bring the economy to its long-term full employment state.
- Which of the following statementsabout how fiscal policy should mostappropriately be used in a crisis iscorrect? a. If fiscal policy is usedappropriately, a fiscal deficitshould appear duringrecessionary gaps and asurplus during inflationary gaps b. Fiscalpolicy should be used at anyand all points of the cycle toaccelerate growth c. None of these statements iscorrect d. If fiscal policy is usedappropriately, a fiscal surplusshould appear duringrecessionary gaps and a fiscaldeficit during inflationarygapsGovernments may achieve certain economic goals; say controlling inflation or boostingeconomic growth, by implementing fiscal and/or monetary policies. Briefly explain thedifference between fiscal and monetary policiesQue 41: What do you understand by cyclicality of the fiscal policy?
- In the first quarter 2020, the unemployment rate in the Gaza Strip reached to 69% due to COVID 19. If the Palestinian government decided to solve this problem by an expansionary fiscal policy. Explain the impacts of this policy on the interest rate and aggregate output? Using graph?"Willam H. Branson" of "Macroeconomic Theory and policy" states that the "Fiscalist Model is an improbable, extreme case of the general model and not a stance to be taken seriously". However, the economic scenario during COVID 19 might indicate otherwise. Write an essay in about 500-600 words expressing your thoughts on this matter. Instructions: Please provide relevant statistics/data in order to substantiate your opinions.posting this again, can you tell me which questions i've gotten wrong? i dont need any explanations for the ones i've gotten right. i just dont know which ones i've missed- if you could explain those that'd be fantastic. thanks 4- Tax cuts in the classical range of the AS will stimulate output and unemployment -false 5- Increasing welfare payments by borrowing money to do so will increase AD- true 6- if the mpc increases, the multiplier decreases- false 7- if the mps increases the multiplier decreases -true 8- part of the cost of growing government budget deficits is and “opportunity cost” of what else could have been done with the money, particularly if the borrowing is used to increase consumption spending. -true 9- tax cuts in the classical range of the AS curve will stimulate output and employment. -true 10- if the AS curve were flat/horizontal an increase in AD would not be inflationary- true 11- an increase in AD might be cause by improving technology in manufacturing processes.…