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Chapter 10: Macroeconomic objective (page 196)

Which factors are affected when the government implements an expansionary fiscal policy?

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components of AD

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01

Macroeconomic objectives

When we look at the macroeconomic policy within an international context we mainly look at how the governments utilize macroeconomic instruments, such as fiscal policy in influencing the exchange rate about international trade. Fiscal policy may affect the exchange rate through income changes, price changes, and interest rates.

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Most popular questions from this chapter

If a \(50 billion initial increase in spending leads to a \)250 billion change in real GDP, how big is the multiplier?

  1. 1.0

  2. 2.5

  3. 4.0

  4. 5.0

In what direction will each of the following occurrences shift the consumption and saving schedules, other things equal?

  1. A large decrease in real estate values, including private homes.
  2. A sharp, sustained increase in stock prices.
  3. A 5-year increase in the minimum age for collecting Social Security benefits.
  4. An economywide expectation that a recession is over and that a robust expansion will occur.
  5. A substantial increase in household borrowing to finance auto purchases.

What is the central economic idea humorously illustrated in the Last Word “TopplingDominoes”? How does the central idea relate to economic recessions, on the one hand, and vigorous economic expansions, on the other?

Why does a downshift of the consumption schedule typically involve an equal upshift of the saving schedule? What is the exception to this relationship?

How can governments utilize fiscal policy?
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