Problem
Set 3
Complete
all questions listed below. Clearly label your answers.
1.
Will
increases in government spending financed by borrowing help promote a strong
recovery from a severe recession. Why or why not?
2.
Does
fiscal policy have a strong impact on aggregate demand? Did the shift of the
federal budget from deficit to surplus during the 1990s weaken aggregate
demand? Did the government spending increases and large budget deficits of 2008–2011
strengthen aggregate demand? Discuss.
3.
What
is the current rate of unemployment (See bls.gov and indicate the month you are
reporting)? How rapidly has GDP grown during the past 3 quarters? (See bea.gov
and state the quarterly growth rate for each of the last three quarters) Is the
economic growth high enough to validate the Keynesian view? Explain.
4.
Are
changes in discretionary and fiscal policy likely to be instituted in a manner
that will reduce the ups and downs of the business cycle? Why or why not?
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