30. Both Monetarist and Keynesian economists argue that stabilization policies (

Question

30. Both Monetarist and Keynesian economists argue that stabilization policies (policies designed to solve the two economic problems) are transmitted primarily through changes in(AD / AS /fiscal policy/ monetary policy/ Money Supply Rule). 31. Economics and politics are intertwined when it comes to some macroeconomic theories. The theory that suggests that government involvement can be the used to help solve economic problems is known as Classical / Keynesian Monetarist/Supply-side) Theory. The theory that suggests that policies designed to benefit those at the top of he socioeconomic spectrum (i.e., the 1%) will benefit the rest of society ecause the members of the 1% will, in response to lower taxes, expand increase business investment spending, hire additional employees and (Classical/ Keynesian increase the wages of employees is known as / Monetarist/ Supply-side) Theory. -32. Arizona lawmakers from (Democrat / Republican / Independent the / Green / Socialist/Libertarian) Party have proudly stated they have followed Supply-Side economic theory and reduced taxes in one form or another every year for more than 20 years. Theoretically, Supply-Side tax cuts are designed to provide incentives for corporations and the wealthiest individuals in the state. Evidence shows that those policies have resulted in an abundance of new high-paying jobs, greater funds for public education and other issues important to the citizens, higher wages for all workers in Arizona, and an overall significant increase in the standard of living for everyone in the 99%. True or False. According to both Supply-siders and Keynesians, cuts in tax rates promote economic growth through the Government and Foreign spending. True or False. 33. 34. Keynesian Theory is known as (Demand Side / Supply Side / Classical/ Monetarist) Theory or a "Bubble Up approach to solving unemployment and/or slow economic growth problems. The essence of this theory is that jobs, wages and standard-of-iving are the result of spending in the economy. As such, providing incentives for lower and middle class citizens will result in them increasing spending which, in turn, will result in a(n) (increase /decrease /no change) in sales for business owners which will then cause a(n) (increase /decrease / remaining stable 7 no change) in hiring (employment) and production (GDP). In other words, (Aggregate Demand / Aggregate Supply / Money / Government Debt/ International Finance) drives the economy 35. Reaganomics is known as (Demand Side /Supply Side/ Classical / Monetarist) Theory or a "Trickle Down" approach to solving unemployment and/or slow economic growth problems. The essence of this theory is that jobs, wages and standard of living are the result of decisions by the wealthiest individuals and corporations in the economy. As such, providing

Explanation / Answer

31.

In any economy changes in one market often ripple outward to affect other market. The path that these effects take is called the transmission mechanism. There are two transmission mechanisms, Keynesian and Monetarist. The Keynesian transmission mechanism between the money and the goods market is indirect one. The Monetarist transmission mechanism between the money and the goods market is direct one. Both assumes the effect initiated through the monetary policy taken by the Central bank.

Therefore, the correct option is: monetary policy

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32.

According to the Keynesian thought the government must take an expansionary fiscal policy in recession to direct the economy towards the potential equilibrium. The expansionary fiscal policy is one in which the government either cut the existing tax rate or/and increase the government spending. Both of these will increase government budget deficit. A deficit financed by borrowing will increase interest rate at the loanable funds market and decrease private spending. According to Keynes the crowding out will be less effective in severe recession. In recession even if the government spending is financed through borrowing, the interest will fall to near zero level and the crowding out will likely to be small.

Fiscal policy consists of changes in government expenditures and/or taxes to achieve economic goals. Expansionary fiscal policy is composed of increases in government expenditures and/or decreases in taxes. Contractionary fiscal policy entails decreases in government expenditures and/or increases in taxes. Here government spending is consists of only government purchases as we hold the transfer payment (the other component of government expenditure) to be constant.

The fiscal policy can be of both demand side and supply side. The demand side fiscal policy can be used to rid the economy of a recessionary gap or an inflationary gap. A recessionary gap calls for expansionary fiscal policy while the inflationary fiscal policy calls for recessionary fiscal policy. The supply side fiscal policy increases the aggregate supply in the economy. As the marginal tax rate decreases it is generally increases the incentive to work hence increasing the supply. If this increase in marginal taxes is of permanent in nature then this could affect the long run aggregate supply curve as well.

Therefore, the correct options are: (1)Keynsiane ; (2) Supply side

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