Chapter 10: Macroeconomic objectives (page 196)
How can governments utilize fiscal policy?
Short Answer
It can be utilized as a demand management tool
Chapter 10: Macroeconomic objectives (page 196)
How can governments utilize fiscal policy?
It can be utilized as a demand management tool
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Get started for freeWhy does a downshift of the consumption schedule typically involve an equal upshift of the saving schedule? What is the exception to this relationship?
Refer to the table in Figure 10.5 and suppose that the real interest rate is 6 percent. Next, assume that some factor changes such that the expected rate of return declines by 2 percentage points at each prospective level of investment. Assuming no change in the real interest rate, by how much and in what direction will investment change? Which of the following might cause this change: (a) a decision to increase inventories; (b) an increase in excess production capacity?
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?
What will the multiplier be when the MPS is 0, 0.4, 0.6, and 1? What will it be when the MPC is 1, 0.90, 0.67, 0.50, and 0? How much of a change in GDP will result if firms increase their level of investment by $8 billion and the MPC is 0.80? If the MPC instead is 0.67?
How is it possible for investment spending to increase even in a period in which the real interest rate rises?
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