quanda37 - Chapter 37 1. Suppose a wave of pessimism...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 37 1. Suppose a wave of pessimism engulfs consumers and firms, causing them to reduce their expenditures. a. Demonstrate this event in Exhibit 1 using the model of aggregate demand and aggregate supply and assuming that the economy was originally in long-run equilibrium. Exhibit 1 Answer: See Exhibit 3. Exhibit 3 b. What is the appropriate activist policy response for monetary and fiscal policy? In which direction would the activist policy shift aggregate demand? Answer: Increase the money supply, increase government spending, decrease taxes. Shift aggregate demand to the right.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Practice Questions to accompany Mankiw & Taylor: Economics 2 c. Suppose the economy can adjust on its own in two years from the recession described in part (a). Suppose policy makers choose to use fiscal policy to stabilize the economy but the political battle over taxes and spending takes more than two years. Demonstrate these events in Exhibit 2 using the model of aggregate demand and aggregate supply.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/06/2009 for the course BUS BAM303 taught by Professor Na during the Spring '09 term at 東京大学.

Page1 / 3

quanda37 - Chapter 37 1. Suppose a wave of pessimism...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online