What is the eventual effect on real GDP if the government increases transfers by $80,000? Assume the marginal propensity to consume (MPC) is 0.75. When government spending is increased, what happens to the long-run level of real GDP, consumption, real wage rate...
A) What happens if spending exceeds real GDP? B) What happens if real GDP exceeds spending? C) Which is worse for consumers? What would happen to the size of the multiplier if investment increases as real GDP increases? Explain. How could real GDP ...
How is it possible for investment spending to increase even when the real interest rate rises? What happens if the real interest rate is less than the growth rate? What happens when the price level rises? a. interest rates rise, so firms increase investment. b. interest rates ...
A country default refers to a situation when a sovereign state is unable or unwilling to fulfill its financial commitments, notably its debt repayments. When a nation defaults, it means it has not made the necessary loan or bond payments. Several nations experienced substantial economic difficulti...
If something severe happens, then you need intervention and external aid. Conversely, we don’t need the same treatment for every slight, odd pain. Constant intervention is a fundamental problem that we play with nature. Do economic empires see an...
"What happens when you print money is you put more dollars into the supply and the value of each dollar goes down," Weliver says. "We have these three things going on at once, so not surprisingly, inflation is really starting to pop." ...
The second type of inflation caused by fiscal policy is called “cost-push inflation.” This happens when government policies are enacted. These policies increase production costs. This can be minimum wage increases or new taxes on products like cigarettes or alcohol. ...
The wallet-harming kind of inflation, however, happens when prices burst at a rate much faster than 2 percent and Americans’ paychecks can’t keep up. Consumers end up having to make tough decisions about what to buy and what to hold off on. Sometimes, they may have no way of avoiding...
Built-in inflation occurs when enough people expect inflation to continue in the future. As the price of goods and services rises, people may come to believe in a continuous rise in the future at a similar rate. Because of these shared expectations, workers may start to demand higher wages ...
Remember that nominal interest rates equal real interest rates plus the expected rate of inflation. After all, banks want to make a profit. As such, they must take it into account when they advertise their rates. Solendersthat want to earn 6% interest when the inflation rate is 2% (and i...