untriltled

Question 1

Monetary policy

Answer 1

By central banks

Question 2

If there’s rapid expansion

Answer 2

High demand
and inflation
So there has to be contractionary fiscal policy where G < and T >

Question 3

How does it help inflation

Answer 3

Inflation happens when demand is greater than supply, pushing prices up.
Contractionary fiscal policy reduces demand by making money less available.
Lower demand leads to slower price increases, helping to stabilize inflation.

Question 4

Recession period

Answer 4

Cyclical UE increases because there’s low demand
and fiscal policy that’s expansionary is included G> and T< (needs gov intervention)

Question 5

Deficit def

Answer 5

Gov spending> gov income

Question 6

If expansion then deficit

Answer 6

G< and T> so deficit should decrease

Question 7

If recession

Answer 7

G> and T< so deficit should increase

Question 8

Net tax

Answer 8

Tax paid-transfer payments

Question 9

Budget deficit

Answer 9

G-T (if > then running deficit if not then running surplus)

Question 11

Disposable income (Yd) (after tax)

Answer 11

Total income Y-net taxes T

Question 12

Planned aggregate expenditure AE becomes

Answer 12

C+I+G

Question 13

Income Y

Question 14

Leakages and injections

Answer 14

Spendings + earnings

Question 15

At equilibrium what happens with the els

Answer 15

Y=AE
so C+S+T=C+I+G
SOOOO
S+T=I+G and I is planned bc at equilibrium change in inventory is 0

Question 16

Multiplier def (in words)

Answer 16

Ratio of change in the equilibrium level of output to a change in some exogenous variable (change In output depending on savings which is exogenous)

Question 17

Multiplier def as eq

Answer 17

deltaY/deltasavings
so delta Y/delta I
and at eq I=S and so its delta Y over delta S so 1/MPS

Question 18

tax multiplier

Answer 18

-MPC/MPS

Question 19

which has more effect on GDP T or G

Answer 19

its delta G and check answer on notes

Question 20

For balanced budget G increase and t increase by same amount is delta g =