Monetary and Fiscal Policy Review
The discount rate raises by two percent. Is this fiscal or Monetary Policy?
Monetary
Define Economic Growth:
Economic growth is an increase in the production of goods and services in an economy
Which economist believed in the "animal spirts"?
Keynes
The Philip's curve shows the relationship between...
Inflation and Unemployment
If tax revenues are less than the total of government spending plus government transfer payments, which of the following will happen?
(A) The tax multiplier will increase.
(B) The spending multiplier will increase.
(C) The government budget will be in surplus.
(D) There will be an inflationary gap
(E) The national debt will increase.
E The national debt will increase.
Stimulus checks were handed out due to national disaster. Is this Fiscal or Monetary Policy?
Fiscal
Why is economic growth good?
Economic growth increases state capacity and the supply of public goods
Who believed that controlling the money supply was vital to controlling the economy?
Chicago School
If AD increases, show what happens to the Philip's Curve
Boards should show point along Graph shifting up
Which of the following changes is most likely to cause economic growth?
(A) A decrease in private savings
(B) A decrease in labor productivity
(C) A decrease in physical capital
(D) An increase in human capital
(E) An increase in the price level
(D) An increase in human capital
What does Fiscal Policy control?
Aggerate Demand
Brazil's GDP is 236 Billion for 2023. Their GDP per capita is 1K. Their nominal interest rate is at 3%.
Canada's GDP is 130 Billion for 2023. Their GDP per capita is 10K. Their nominal interest rate is at 5%.
Who has more economic growth?
Canada
Which school of thought believed in a laissez-faire approach?
Classical or Austrian
If AS decreases what shifts on the Philip's curve?
Boards should show the curve would shift down
Country X's economy is in an inflationary gap. Which of the following combinations of fiscal and monetary policy actions would be most effective to restore full employment in the short run?
(A) A decrease in income taxes and a decrease in the required reserve ratio
(B) A decrease in income taxes and an increase in the discount rate
(C) A decrease in government spending and an open-market purchase of government bonds by the country’s central bank
(D) An increase in government spending and targeting a lower policy rate
(E) An increase in income taxes and an increase in the central bank’s administered interest rates
E) An increase in income taxes and an increase in the central bank’s administered interest rates
List two types of Contractionary Fiscal Policy
Raise Taxes and Cut Gov. Spending
List one way you can measure economic growth
GDP, Cost of Living, GDP per capita, Access to Resources
Who believed that surplus labor caused problems in the economy?
Karl Marx
If the Unemployment rate increased would occur on the Philip's Curve?
Boards should show the LRPC would increase
Assume policy makers increased spending and cut taxes to stimulate the economy. If the government’s budget was initially in balance, which of the following will occur?
(A) There will be a budget deficit, real interest rates will increase, and investment spending will be crowded out.
(B) There will be a budget deficit, real interest rates will decrease, and investment spending will increase.
(C) There will be a budget surplus, real interest rates will increase, and investment spending will be crowded out.
(D) There will be a budget surplus, real interest rates will decrease, and investment spending will increase.
(E) The budget will remain in balance, real interest rates will not change, and investment spending will not change.
(A) There will be a budget deficit, real interest rates will increase, and investment spending will be crowded out.
List three types of expansionary Monetary Policy
Buy Bonds, Decrease Interest/Discount Rate, lower the reserve Ratio
What three types of public policy can promote economic growth?
Who believed that low effective demand was not self-correcting?
Keynes
The government dedicated 2 million dollars to creating new factory jobs. What happens to the Philip's curve?
See Board ((SRPC should shift down))
Assume an economy is in long-run equilibrium and the central bank engages in an expansionary monetary policy for a prolonged time period. If the velocity of money is constant, which of the following is true according to the quantity theory of money
(A) The government’s budget deficit will increase.
(B) Price level will increase at the same rate as the money supply.
(C) Real output will exceed full employment in the long run.
(D) The actual unemployment rate will exceed the natural rate of unemployment.
(E) The production possibilities curve will shift inward.
(B) Price level will increase at the same rate as the money supply.