Practice Quiz 5 Answers

What can we do to get the economy moving since if we

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: we do to get the economy moving since if we don't, the voters will take it out on us? This was the problem facing George Bush II in 2004 because he knew that George I had been denied a second term for the poor performance of the economy. One of the pieces of the Bush revival policy was an increase in government spending on the war in Iraq. Let's assume you have been studying the economy for some years and that you have read the section on multipliers and know the multiplier is 3. If you knew the economy had to expand by $1,200 million, what would you suggest as the appropriate policy? a. an increase in the money supply of $400 million b. a decrease taxes of $200 million c. an increase in interest rates of 4 percent d. an increase in government spending of $400 million use the multiplier formula DY/DG = 3 and solve for the unknown = 1200/DG or T = 3 DG = 1200/3 = 400 14. In the early 2000s the Bush administration worried about the economy knowing that the president's father had been denied a second term for the poor performance of the economy. One of the pieces of the Bush revival policy was an increase in government spending on the war in Iraq. Let's assu...
View Full Document

This document was uploaded on 03/01/2014 for the course ECN 202 at Rhode Island.

Ask a homework question - tutors are online