Q: Draw the Phillips curve. Use the model of aggregate demand and
Draw the Phillips curve. Use the model of aggregate demand and aggregate supply to show how policy can move the economy from a point on this curve with high inflation to a point with low inflation.
See AnswerQ: The problem of time inconsistency applies to fiscal policy as well as
The problem of time inconsistency applies to fiscal policy as well as to monetary policy. Suppose the government announced a reduction in taxes on income from capital investments, like new factories....
See AnswerQ: Why are the benefits of reducing inflation permanent and the costs temporary
Why are the benefits of reducing inflation permanent and the costs temporary? Why are the costs of increasing inflation permanent and the benefits temporary? Use Phillips-curve diagrams in your answer...
See AnswerQ: Suppose the federal government cuts taxes and increases spending, raising the
Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 12 percent of GDP. If nominal GDP is rising 5 percent per year, are such budget deficits sustainable for...
See AnswerQ: Explain how each of the following policies redistributes income across generations.
Explain how each of the following policies redistributes income across generations. Is the redistribution from young to old or from old to young? a. an increase in the budget deficit b. more generous...
See AnswerQ: The price of cheese rises from $6 to $10 per
The price of cheese rises from $6 to $10 per pound, while the price of wine remains $3 per glass. For a consumer with a constant income of $3,000, show what happens to consumption of wine and cheese....
See AnswerQ: What is the fundamental trade-off that society faces if it
What is the fundamental trade-off that society faces if it chooses to save more? How might the government increase national saving?
See AnswerQ: The chapter suggests that the economy, like the human body,
The chapter suggests that the economy, like the human body, has “natural restorative powers.” a. Illustrate the short-run effect of a fall in aggregate demand using an aggregate-demand/aggregatesupply...
See AnswerQ: Policymakers who want to stabilize the economy must decide how much to
Policymakers who want to stabilize the economy must decide how much to change the money supply, government spending, or taxes. Why is it difficult for policymakers to choose the appropriate strength o...
See AnswerQ: What might motivate a central banker to cause a political business cycle
What might motivate a central banker to cause a political business cycle? What does the political business cycle imply for the debate over policy rules?
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