Explain the shapes of the supply curve and the demand curve.

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Define fiscal policy. Determine whether each of the following,

Define fiscal policy. Determine whether each of the following,

Question

The completed homework should be between 6 and 8
pages in length. All sources used must
be referenced (Paraphrased and quoted material must have accompanying
citations). All references must be in
APA format.
1. (Fiscal
Policy) Define fiscal policy. Determine
whether each of the following, other factors held constant, would lead to an
increase, a decrease, or no change in the level of real GDP demanded:
a. A decrease in government purchases
b. An increase in net taxes
c. A reduction in transfer payments
d. A decrease in the marginal propensity to
consume
2. (Changes
in Government Purchases) Assume that government purchases decrease by $10
billion, with other factors held constant, including the price level. Calculate the change in the level of real GDP
demanded for each of the following values of the MPC. Then, calculate the change if the government,
instead of reducing its purchases, increased autonomous net taxes by $10
billion.
a. 0.9
b. 0.8
c. 0.75
d. 0.6
3. (Fiscal
Policy) Chapter 11 shows that increased government purchases, with taxes held
constant, can eliminate a recessionary gap.
How could a tax cut achieve the same result.
4. (Evolution
of Fiscal Policy) What did classical economists assume about the flexibility of
prices, wages, and interest rates? What
did this assumption imply about the self-correcting tendencies in an economy in
recession? What disagreements did Keynes
have with classical economists?
5. (The
federal budget process) Why does the budget require a forecast of the
economy? Under what circumstances would
actual government spending and tax revenue fail to match the budget as
approved?
6. (Federal
Debt) What has happened to the federal debt since 2008 as measured relative to
GDP?
7. (Net
Public Debt) What’s the level of net public debt (for federal, state, and local
governments) relative to U.S GDP? How
does the U.S measure compare with that of other major economies?
8. (Subprime
Mortgages) What are subprime mortgages, and what role did they play in the
financial crisis in 2008?
9. (Money
Creation) Show how each of the following would initially affect a bank’s assets
and liabilities.
a. Someone makes a $10,000 deposit into a
checking account.
b. A bank makes a loan of $1000 by establishing
a checking account for $1000.
c. The loan described in part (b) is spent.
d. A bank must write off a loan because the
borrower defaults.
10. (Money
Control) Suppose the money supply is currently $500 billion and the Fed wishes
to increase it by $100 billion.
a. Given a required reserve ratio of 0.25, what
should it do?
b. If it decided to change the money supply by
changing the required reserve ratio, what change should it make? Why may the
Fed be reluctant to change the reserve requirement?
11. (Money
Demand) Suppose that you never carry cash.
Your paycheck of $1000 per month is deposited directly into your
checking account, and you spend your money at a constant rate so that at the
end of each month your checking account balance is zero.
a. What is your average money balance during the
pay period?
b. How would each of the following changes
affect your average monthly balance?
i. You are paid $500 twice
monthly rather than $1000 each month.
ii. You are uncertain about your
total spending each month.
iii. You spend a lot at the
beginning of the month (e.g, for rent) and little at the end of the month.
iv. Your monthly income increases.
12. (Market
Interest Rate) With a diagram, show how the supply of money and the demand for
money determine the rate of interest?
Explain the shapes of the supply curve and the demand curve.
13. (Money
Supply Versus Interest Rate Targets) Assume that the economy’s real GDP is
growing.
a. What will happen to money demand over time?
b. If the Fed leaves the money supply unchanged,
what will happen to the interest rate over time?
c. If the Fed changes the money supply to match
the change in money demand, what will happen to the interest rate over time?
d. What would be the effect of the policy
described in part (c) on the economy’s stability over the business cycle?
14.
(Arguments for Trade Restrictions) Explain the national defense,
declining industries, and infant industry arguments for protecting a domestic
industry from international competition.
15.
(Arguments for Trade Restrictions) Firms hurt by lower priced imports
typically argue that restricting trade will save U.S jobs. What’s wrong with this argument? Are there any reasons to support such trade
restrictions?
16. (Balance
of Payments) The following are hypothetical data for the U.S balance of
payments. Use the data to calculate each
of the following:
a. Merchandise trade balance
b. Balance on goods and services
c. Balance on current account
d. Financial account balance
e. Statistical discrepancy
Billions of
Dollars
Merchandise exports
350.0
Merchandise imports
2,425.0
Service
exports 2,145
Service
imports
170
Net
income and net transfers
221.5
Change in U.S owned assets abroad 245.0
Change in
foreign owned assets in U.S 100.0
17. (Balance
of Payments) Explain where in the U.S balance of payments an entry would be
recorded for each of the following:
a. A Hong Kong financier buys some U.S corporate
stocks
b. A U.S tourist in Paris buys some perfume to
take home
c. A Japanese company sells machinery to a
pineapple company in Hawaii.
d. U.S farmers gave food to starving children in
Ethiopia.
e. The U.S treasury sells a bond to a Saudi
Arabian prince.
f. A U.S tourist flies to France on Air France.
g. A U.S company sells insurance to a foreign
firm.

Define fiscal policy. Determine whether each of the following,

 
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