8. What did pre-Keynesian believe about the market and its ability to pull itsel

Question

8. What did pre-Keynesian believe about the market and its ability to pull itself out of a recession?

12. What are the relations between government spending, the marginal propensity to consume, the marginal propensity to save, and the multiplier effect?

13. What are some of the problems with using fiscal policy in an effective manner?

18. What is the new classical approach to the stimulatory impact of fiscal policy implemented through deficit spending?

22. What approach to the money supply do those embracing monetarism suggest?

24. How do shifting price levels impact debtors and savers?

25. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a tax cut?

26. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a tax increase?

27.   Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of an increase in government spending?

28. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of a cut in government spending?

29. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of an expansionary monetary policy?

30. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a restrictive monetary policy?

32. How does a deficit and large debt influence the economy?

33. What is the relationship between the expansion of the money supply and inflation?

35. How do expectations impact the effectiveness of monetary policy?

36. What restricts the ability of the Fed to purchase U.S. securities?

39. What is the impact of higher interest rates on the value of a currency and a nation%u2019s net exports?

41. Why do countries willing lend the U.S. government money despite the relatively large debt to GDP ratio of the United States?

42. How does trade contribute to growth?

44. How does the relative size of government contribute to growth?

47. Do High Income countries always grow at a faster pace than lesser developed countries?

48. How do high levels of inflation effect growth?

49. Can you identify the amount of growth in an economy by using the percentage change formula?

50. What countries are presently experiencing high rates of economic growth?

Explanation / Answer

25-30) Yes the aggregate demand represents the fiscal policy and the aggregate supply monetary. An expansion would lead to a rightward shift whereas the contraction to a leftward shift

32) Deficit means when the countries imports are more than the exports. So they borrow. This influences the economy in a bad way as they need to pay excess interest on the debts at a time when they are already short of money.

33) Expansion of money supply means more money with the people which means a higher demand leading to price rise and thus inflation.

35)Sometimes the government expects a monetary policy which is not provided by the Fed, this impacts its effectiveness. Investors lose confidence.

36) Inflation

39) higher interest rates appreciate a currency and the net exports may decrease.

41) Because of the confidence in Dollars. US government though wouldnt do it but can pay their debt by printing more dollars without it being dpericiated. In other words the risk of default by the US government is very unlikely

42) Trade is directly proportional to growth. A country's exports and imports contribute directly to the growth. A trade surplus directly adds up to the GDP.

44)Higher the government expenditure higher will be the growth

47)No US is a high income country but it is growing less than India.

48)High levels of inflation lead to lesser consumption and thus reduce the growth of a country

49) Yes

50) China and India are the two big economies with high economic growth of nearly 7 and 5% respectively. If we take even smaller economies then libya has highest growth rate of 121.9%. Mongolia , Bhutan , Afganistan, Liberia etc also have high growth rates

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