(i) Using IS/LM diagram explain the likely effects of a fiscal expansion financed by government borrowing on both the domestic interest rate and the level of economic activity. (ii) Briefly explain what the national debt is and why keeping the national debt down as a nercentage of GDP can be a good thing.
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- What is the main reason for employing contractionary fiscal policy in a time of strong economic growth?The U.S. government has shut down a number of times In recent history Explain how a government shutdown will affect the variables In the national Investment and savings identity Could the shutdown affect the government budget deficit?Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending by the University of Illinois is not fiscal policy? Why is a cut in the payroll tax fiscal policy whereas a cut in a state income tax is not fiscal policy?
- explanation. Be sure to exp Assume the United States has been in another recession for the past 10 months. Unemployment is 10% and GDP has dropped $1.9 trillion from its previous peak of $ 20.8 trillion. The housing and heavy equipment industries have been hit the hardest. Inflation has been near the 2% target but has started to dip below. Also, the countries average MPC is 60. Determine the best fiscal policy/strategy to help the economy recover and explain why it is the best choice. Be sure to reference Aggregate Demand and Aggregate Supply and explain your specific tools in your answers. Calculations Explanation Graph (More space for the explanation on the back)Economics Under which condition the fiscal policy has the maximum effect on real national income? Sketch graph and explain your answer.(a) The hypothetical information in the following table shows what the situation will be in if the government of Singapore does not use fiscal policy: Year 2020 2021 Potential GDP S$20.1 billion Real GDP S$20.1 billion S$20.1 billion Price Level 110.0 S$20.75 billion 120.5 If the government of Singapore wants to keep its real GDP at its potential level in 2021, determine whether an expansionary or contractionary policy should be applied. i. ii. If government of Singapore is successful in keeping real GDP at its potential level in 2021, discuss what would happen to the level of real GDP, potential real GDP, inflation rate and unemployment rate. iii. Draw an aggregate demand and aggregate supply diagram to illustrate the impacts and changes in (ii). Be certain to include L.RAS curves for 2020 and 2021; SRAS curves for 2020 and 2021; AD curves for 2020 and 2021, with and without fiscal policy action; and equilibrium real GDP and the price level in 2021, with and without fiscal policy.
- Question: "In a hypothetical economy, the government implements a fiscal stimulus package by increasing public spending on infrastructure projects. At the same time, there is a significant rise in consumer savings rates. Discuss the potential short-term and long- term impacts of these simultaneous events on the economy's aggregate demand, interest rates, and inflation. Consider how these changes might affect the effectiveness of the fiscal stimulus in achieving its intended economic objectives."A A a v Paragraph Styles 2) a) Using IS/LM diagram explain the likely effects of a fiscal expansion financed by government borrowing on both the domestic interest rate and the level of economic activity. (draw diagram) (b) Briefly explain what the national debt is and why keeping the national debt down as a percentage of GDP can be a good thing. D Focus( 1:23:36 10:50 PM .. 4.6KB/s O & A Jl (71) = Chegg Time remaining: 00:09:57 Economics Economic situation: The economy is suffering from an unemployment problem created by too little spending on goods and services that has caused an economic slowdown (recessionary gap). The federal government has been called upon to implement fiscal policy measures. What is the name of the fiscal policy that the government would implement? What are the two actions that can be taken and would they be increased or decreased to close the recessionary gap and take care of the problem of unemployment? Answer Skip Exit 1
- 6. Graphical treatment of taxes and fiscal policy The main difference between variable taxes and fixed taxes is that unlike fixed taxes, variable taxes do not vary with GDP The following graph shows the consumption schedule for an economy with a given level of taxes. Suppose the government implements a tax increase through a fixed tax. Use two green points (triangle symbol) to connect the two black points (plus symbols) representing the consumption schedule after the change in taxes. Hint: The new consumption schedule must pass through one point on the left and one point on the right. Hint: The new consumption schedule must pass through one point on the left and one point on the right. 50 Consumption with Tax Increase through a Fixed Tax Consumption with Tax Increase through a Variable Tax + 20 40 60 80 100 REAL GDP (Billions of dollars) The blue line on the next graph represents the original total expenditure line for this economy before the change in tax structure. Use the new…'The U.S., world's largest economy, went into recession in February of 2020. It has taken a broad range of steps to combat the economic disruption caused by COVID-19. In response to this crisis, governments have enacted sweeping and sizable fiscal stimulus of trillions of dollars.' Is it an appropriate policy response if the primary responsibility of the government is to maintain economic growth? Explain the significance of Fiscal policy for an economy? Is there any difference in the two approaches of fiscal expansion through - direct transfer benefit and government spending directly on purchase of goods and services that may influence real GDP? What role does multiplier play? Explicate. Support your answer with the suitable diagram/s.Que 41: What do you understand by cyclicality of the fiscal policy?