Chapter 13 notes

Topics: Keynesian economics, Public finance, Macroeconomics Pages: 2 (504 words) Published: April 15, 2014
Macroeconomics
Chapter 13.

Fiscal policy: discretionary attempts by the federal gov to shift the demand curve to the left or right

In recession -> shifts right
In inflation -> shofts left

Stabilization policies (fiscal, monetary, automatic stab

homework questions:

Homework #8 Chapter 13, Spring 2014.

1. Show the economy at full employment. Show graphically and state how the economy would go into a recession—be specific about the kinds of spending that would change and why it might change. Then, show graphically and state how fiscal policy could be used to get the economy back to full employment—be specific please.

2. From the problem above, if the RGDP gap was 2 trillion dollars, and the multiplier is 2, what would have to be the initial change in spending to get the economy back to full employment? What kind of spending would be more likely to move the economy back to full employment and why? What kinds of things would this money be spent on?

3. Show the economy at full employment. Show graphically and state how the economy would go into inflation—be specific about the kinds of spending that would change and why it might change. Then, show graphically and state how fiscal policy could be used to get the economy back to full employment—be specific please.

4. From the problem above, if the RGDP gap was 2 trillion dollars, and the multiplier is 2, what would have to be the initial change in spending to get the economy back to full employment? What kind of spending would be more likely to move the economy back to full employment and why? What kinds of things would this money be spent on?

5. Fiscal policy is defined as the change in government spending or a change in taxes. If you were the adviser to the president, what information would you provide to him about the difference between using taxes or government spending?

6. The equation for using the multiplier for a change in spending is DY...
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