Government fiscal policy variables
Problem: According to the Keynesian and Classical models, what will a decrease in the marginal propensity to consume have on changes in government fiscal policy variables (Government Purchases (G) or Net Taxes (T) impact on the models?
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The impact will be in terms of major macroeconomic variables of US economy.
Why has the.U.S. been unable to achieve its economic policy goals of full employment, price stability and economic growth?
Assume the MPE is .75. If the government raises spending by $100 Billion the equilibrium level of GDP should (assuming Keynesian economics):
During one period in history, business investment spending dropped and our trade deficit got larger (imports were bigger than exports.) A reason this did not lead to a drop in GDP could have been:
According to the Keynesian and Classical models, what will a decrease in the marginal propensity to consume have on changes in government fiscal policy variables (Government Purchases (G) or Net Taxes (T) impact on the models?
(a) Write out P[t] for t = 2 to 5. (b) How does this model compare with the adaptive expectations model? (c) How "rational" is the model?
If the Bank of Canada implemented expansionary monetary policy in an attempt to exactly counter the effect in (a) above, what would happen to the aggregate demand curve, equilibrium income, and the price level?
Over the same period, the productivity of barbers has remained constant. Suppose workers can move freely between farmers and being barbers. What does this mobility imply for the wages of farmers and barbers?
Problem: Discuss the various ways governments can handle externalities, such as noise from a local airport or a barking dog or building of commercial office space or an industrial building in a residential area?
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