Use a diagram to explain why fiscal and monetary policies are ineffective in combating stagflation. How is a stagflation cured? What is the difference between a recessionary gap and an inflationary gap? Which economic variable(s) would be most severely affected by a recession? Explain. ...
Explain and diagrammatically represent how a self-regulating economy removes itself from an inflationary gap. How would Keynesian economists explain the performance of the economy during the last few years? What has happened to aggregate demand?
An inflationary gap occurs whenever huge excess demand occurs due to high employment and even huge trade activities for which actual GDP becomes more than the potential GDP. Answer and Explanation:1 The federal funds rate is often increased during high infl...
The president of the United States announces in a press conference that he will fight higher inflation with a new anti-inflation program. Predict what will happen to interest rates if the public believes him. Show using a supply and demand diagram. Suppose that the GDP deflator grew by 10...
State a monetary policy and explain how it is used to close an inflationary gap? Draw the aggregate demand and supply model showing the changes in price levels and real GDP. Monetary Policy a. If the economy is at full employment level of output where Y=Y*, demonstrate th...
Explain how the Federal Reserve can use open market operations, reserve requirements, and fed funds/discount rate policies to resolve an economy with an inflationary gap. What is the difference between the discount rate and the federal funds rate?
Answer to: Explain how fiscal policy can be used to close the (a) recessionary gap and (b) inflationary gap. By signing up, you'll get thousands of...
State a monetary policy and explain how it is used to close an inflationary gap? Draw the aggregate demand and supply model showing the changes in price levels and real GDP. Suppose the Federal Bank has increased the discount rate. With the aid of an aggregate demand...
Assume that the marginal propensity to consume is 0.75 Explain how fiscal policy can be used to close the inflationary gap. Explain the ways in which Fiscal Policy and Monetary Policy interact by using Keynesian IS and LM curves. Discuss the impact of an expa...
Explain how the Federal Reserve can use open market operations, reserve requirements, and fed funds/discount rate policies to resolve an economy with an inflationary gap. Suppose the Federal Reserve reduces banks' reserve requirements. Explain how this would aff...