Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Chapter 5, Problem 5QQ
To determine
The hyperinflation.
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Syria’s economic situation is getting worse. Price levels are increasing significantly as the flow of supplies remain low. How can the level of inflation be controlled in a situation like this?
a.
Increase aggregate demand by expansionary fiscal policy
b.
Increase money supply by decreasing bank reserve requirements
c.
Increase tax collections to limit aggregate demand
d.
Increase aggregate supply through importation of necessary goods
a. The Government of Bangladesh opted for expansionary fiscal policy to fight economic depression. Identify the type of inflation it is expected to create and its impact on the wages. Illustrate the process on the graph.
b. Assume the Pakistan’s economy is in recession: Pakistan implements a combination of expansionary fiscal and monetary policy. In the absence of complete crowding out what will be the effect of these policies on each of the following:
i. Aggregate demand in Pakistan
ii. The price level in Pakistan
iii. Interest rates in Pakistan
Fiscal and Monetary Policies
a. Write down the relationship between Budget Deficits, Debt, Government Spending and Taxes as a ratio to GDP. Explain the four independent variables that affect the ratio of Debt to GDP and the direction of its movement
b. Explain the difference between policy rule and policy discretion in monetary policy. Please provide examples.
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- When fighting a recessionary gap, central banks will amount of loans being provided by commercial banks. Select one: a. Increase; decrease b. Decrease; increase the bank rate in order toarrow_forwardIf the economy is in long-term equilibrium and cost of energy for production increases, which of the following is likely to occur? Select one: a. It will lead to demand-pulled inflation and create an expansionary gap. b. It will lead to demand-puled inflation and create a contractionary gap. c. It will lead to cost-pushed inflation and create an expansionary gap. d. It will lead to cost-pushed inflation and create a contractionary gap. e. It will create hyperinflation in the economy, but will not create an economic gap.arrow_forwardOpponents of using policy to stabilize the economy generally believe that a. neither fiscal nor monetary policy have much impact on aggregate demand. b. attempts to stabilize the economy can increase the magnitude of economic fluctuations. c. unemployment and inflation are not cause for much concern. d. All of the above are correct.arrow_forward
- Question 1 1. Explain and use diagrams, to demonstrate the effect on prices and output if: a. farmers experience excellent growing conditions for a prolonged period. b. households decide to spend a larger share of their income. Question 2 a. Explain why aggregate demand curve is downward sloping? b. What is the difference between monetary and fiscal policy?arrow_forwarda. b. C. What will the federal government do to taxes? increase What will the federal government do to government spending? decrease What impact will this have on consumer spending? they cannot buy as mucl QUESTION 5 QUESTION 4 Directions: Use the given scenarios and the information you have learned about Fiscal and Monetary policy to complete the questions that follow The economy of Northhurst is currently experiencing GDP growth of over 7% with inflation rates of 4% and unemployment of 1% Jaelyn finds that everything she wants to buy costs m ore money, but her wages haven't increased. She is worried about being able to afford everything she needs. The Results As the money supply (increases/decreases) businesses will get (more/less) | (increases/decreases) When that happens Jaelyn will see prices (rise/fall) Q 2 F2 Directions: Use the given scenarios and the information you have learned about Fiscal and Monetary policy to complete the questions that follow The economy of Andorra is…arrow_forwardAnalysis of the Great Depression indicates that a. even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic downturn. b. the depth of the economic plunge, if not its onset, was the result of monetary, fiscal, and regulatory policies. c. a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. d. even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 0000arrow_forward
- Long-run aggregate supply is the level of output given by a. price stickiness b. aggregate demand c. potential output d. monetary policyarrow_forwardSuppose an economy experiences an increase in exports. a. Using the Aggregate Demand- Aggregate Supply model, explain the effect of this increase in the short run. b. What can the policy-makers do to address this shock and why should policymakers take any action? Would you choose a fiscal policy or a monetary policy? Why? With diagramsarrow_forwardAssume there is a desire to reduce unemployment in an economy. Describe two (2) expansionary fiscal policy measures and two (2) expansionary monetary policy measures you would recommend to reduce the rate of unemployment. Explain how each measure would help the problem Also explain how each of these measures would affect inflation.arrow_forward
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