Use Figure: AD–AS Model I. If the economy is at point X, the appropriate fiscal policy is to:Choose one answer from the options below.increase taxes and decrease government spending.decrease taxes and increase government spendingincrease the money supply and interest rates.decrease the money supply and interest rates.BackNext

Suppose the economy has unemployment level close to 15%. A proper fiscal policy might be which of the following:Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aa decrease in interest ratesba decrease in income taxescdecrease in government spendingdan equal decrease in government spending and taxes

In this assessment task, you must utilise the IS-LM and AD-AS models to illustrate short-run economic fluctuations and the movement to long-run equilibrium. Assume a large open economy with a floating exchange rate. Ensure your graphs align with the appropriate IS-LM (upwards-sloping LM curve) and AD-AS modelling frameworks. Always draw the IS-LM diagram above the AD-AS diagram and show the connection between both graphs. You must complete this part of the assessment task for your allocated policy mix, with the fiscal and monetary policy mix allocation 我分配到的财政和货币政策组合是 a) Negative demand shock b) No fiscal or monetary policy c) Adjustment of inflation expectations (if needed） Important hints: • Use different colors for a) b) c). • First, explain what happens to GDP, interest rates, unemployment, and inflation as a result of the shock in a) . Show it in the diagrams. • Second, explain if the policy in b) makes sense and how it affects GDP, interest rates, unemployment, and inflation. Show it in the diagrams. For students with “No fiscal or monetary policy”: explain which economic mechanism will bring the economy back to potential GDP over time. • Third, explain if the inflation rate in your graph is consistent with inflation expectations. Show how your graph is changing when inflation expectations adjust to the situation in your graph.

How does the government typically change fiscal policy to try to keep the economy stable during a period of rapid economic growth?A.Lowering taxes on businesses and individualsB.Increasing the amount of money in circulationC.Decreasing the amount of money in circulationD.Increasing taxes on businesses and individualsSUBMITarrow_backPREVIOUS

Fiscal policy helps the government manage the economy by:A.setting the level of unemployment for the year.B.spending tax money during difficult economic times.C.setting environmental regulations for businesses.D.deciding on the proper money supply in the country.

How does the government use fiscal policy to influence the economy?Multiple choice question.By changing interest ratesBy printing or destroying moneyBy creating new businessesBy controlling taxation and its own spending