Economics ECON S - 1920 Lecture Notes - Lecture 1: Procyclical And Countercyclical, Bank Reserves, Demand Curve

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nicolk

15 Dec 2021

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Harvard University

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Economics

Course

Economics ECON S - 1920

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Document Summary

Countercyclical policies: attempt to reduce intensity of economic fluctuations and smooth growth rates of employment, gdp & prices, either expansionary or contractionary. Countercyclical monetary policy: conducted by central back that attempts to reduce economic fluctuations by manipulating bank reserves & interest rates. Countercyclical fiscal policy: aims to reduce economic fluctuations by manipulating government expenditures & taxes. Common features of both policies: during recession: both policies shift labour demand curve to right (expansionary policy, during boom: both policies shift labour demand curve to left (contractionary policy) 1. 1 effect of countercyclical policy on labour market (a) flexible wage case: left shift during recession, countercyclical policy partially reserves situation by shifting labour curve to right. Increase in wages and increase in employment (green arrow) (b) rigid wage case: left shift during recession, countercyclical policy partially reverses situation by shifting labour curve to right.

Related Questions

1. Discretionary fiscal policy refers to:

A. Any change in government spending or taxes that destabilizes the economy.

B. The authority that the President has to change personal income tax rates.

C. Intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

D. The changes in taxes and transfers that occur as GDP changes.

2. Countercyclical discretionary fiscal policy calls for:

A. Surpluses during recessions and deficits during periods of demand-pull inflation.

B. Deficits during recessions and surpluses during periods of demand-pull inflation.

C. Surpluses during both recessions and periods of demand-pull inflation.

D. Deficits during both recessions and periods of demand-pull inflation.

3. Contractionary fiscal policy is so named because of it:

A. Involves a contraction of the nation's money supply.

B. Necessarily reduces the size of government.

C. Is aimed at reducing aggregate demand and thus achieving price stability.

D. Is expressly designed to expand real GDP.

brownsea-lion330

In an effort to move the economy out of a recession, the federal government would engage in expansionary economic policies. Respond to the following points in your paper on the actions the government would take to address expansionary fiscal and monetary policies:

Expansionary Fiscal Policy:

Explain the actions the federal government would take while engaging in expansionary fiscal policy in terms of the following:

The necessary change in taxes and government spending,

The effect on aggregate demand, GDP, and employment.

Expansionary Monetary Policy:

The three tools the Federal Reserve Bank (The Fed) uses when conducting monetary policy are the required reserve ratio, the discount rate, and open market operations.

Explain the actions of the Fed in regard to the three tools.

When the required reserve ratio is increased or decreased

When the discount rate is increased or decreased

Buying or selling government securities when conducting expansionary monetary policy

Explain how these actions would affect the money supply, interest rates, spending, aggregate demand, GDP, and employment.

raspberrygoose799

1. Lowering interest rates is a common monetary policy tool used to;

A. stimulate economic growth.

B.lower inflation.

C.decrease government borrowing costs.

D.none of these

2. Lower interest rates can also;

A.push prices lower.

B.push prices were higher.

C.lead to stagnation.

D.none of these

3. When central banks increase the money supply and take steps to lower interest rates it is known as;

A.expansionary monetary policy.

B.an inflation hawk stance.

C.contractionary monetary policy.

D.expansionary fiscal policy.

4. When Governments increase expenditures it is known as;

A.expansionary fiscal policy.

B.Contractionary fiscal policy.

C.contractionary monetary policy.

D.expansionary monetary policy.

pinkox599

Economics ECON S - 1920 Lecture Notes - Lecture 1: Procyclical And Countercyclical, Bank Reserves, Demand Curve

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