ECO349H5 Chapter Notes - Chapter 1: Government Spending, Autarky, Consumption Function

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15 May 2017

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Eco202: homework assignment 1: read the statements below carefully. Decide whether the underlined statement is true, false or uncertain and explain the arguments for your answer. If any sentences appear before the underlined statement, it provides information to you about the scenario it is true. Answers without an explanation will not receive credit. T = 100 (m/p)d = 0. 1y 2i (m/p)s = 60. Yn = 525: derive equations for the is and lm curves. Note: the interest rate will already be expressed as a percent. For example, if i = 1, the interest rate is 1%: using your answer from above, what type of fiscal policy would move the economy to. Is-lm graph, show the effect before and after the policies. Explain the effect on y, i, and i: suppose you"ve been hired by the government of canada as an economic consultant to help make some policy recommendations. You"ve been given the following information about the.

Related Questions

Which of the following statements is not correct?

Select one:

a. An increase in government spending raises the equilibrium level of income by a multiple of the original spending increase.

b. Government spending is part of fiscal policy.

c. A decline in government spending brings about a contraction in the economy.

d. Government spending is a means to close a recessionary gap.

e. An increase in government spending shifts the AD curve downward by a fraction of the rise in government spending.

Which of the following was not a cause of the U.S. budget deficits in the 1980s?

Select one:

a. Recessions in the early 1980s

b. A substantial increase in government spending

c. Expansion of existing government programs

d. A substantial decrease in tax rates

e. A relatively constant level of taxation

Which of the following does not qualify as an automatic stabilizer?

Select one:

a. Proportional income taxes

b. Food stamps

c. Welfare payments

d. Progressive income taxes

e. Unemployment compensation

Income taxes affect aggregate demand

Select one:

a. indirectly by changing consumption.

b. indirectly by changing investment spending.

c. indirectly by changing net exports.

d. directly by changing disposable income.

e. directly through government spending.

Which of the following constitutes a direct tax?

Select one:

a. Personal income taxes

b. Sales taxes

c. Excise taxes

d. Trade tariffs

e. Value-added taxes

apricotcoyote943

Balanced Budgets: Suppose that the government passes a balanced budget law.

This law - known in popular media as pay-as-you-go - requires the government to

meet any increase in government spending with an increase in taxes i.e. G "= T ".

This question will analyze the consequences of this law on the macro economy

under classical assumptions.

Consider the following Economy

Y = C + I + G

C = c0 + c1(Y - T)

I = I0 - I1r

G = _G

T = _ T

a) An increase in government spending and taxes represent a change in the demand for output. Under classical assumptions supply creates its own demand. Therefore, what is the impact of a change in taxes and government speding on output?

b) What market do you expect to be affected by a change in government speding under a balanced budget rule?

c) Assume that government increases spending to fund social security, which implies that taxes go up by an equal amount, what effect will this have on the real interest rate?

d) How does your answer depend on the marginal propensity to consume?

True/False/Uncertain

A) Changes in expected future one-year real interest rates have a much larger effect on spending than changes in the current one-year real interest rate

B) The introduction of expectation implies that the IS curve is still downward sloping but is now much flatter

C) Current real money demand is inversely related to the future nominal interest rate

D )The rational expectations assumption implies that consumers consider the effects of future fiscal policy on output

E) Future monetary policy affects future economic activity but not current economic activity

F) Depending on its effect on expectations, a fiscal contraction may actually lead to an economic expansion

G) The very different effects of Ireland's deficit-reduction programs in 1982 and in 1987 provide strong evidence against the hypothesis that deficit reduction can lead to an expansion of output in the short run

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ECO349H5 Chapter Notes - Chapter 1: Government Spending, Autarky, Consumption Function

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