Trusted by Students Everywhere
Why Choose Us?
0% AI Guarantee

Human-written only.

24/7 Support

Anytime, anywhere.

Plagiarism Free

100% Original.

Expert Tutors

Masters & PhDs.

100% Confidential

Your privacy matters.

On-Time Delivery

Never miss a deadline.

Suppose an economy in which there are only taxes autonomous

Economics Oct 28, 2020

Suppose an economy in which there are only taxes autonomous. The economic authorities are evaluating two possibilities to boost GDP in the short term. The options are to increase the money supply or increase transfers from the government. Consider that they can only do one of the two. Please indicate the correct statement. o Fiscal policy will cause a decrease in private savings and an increase in the demand for money and consumption The monetary policy will cause an increase in GDP and a decrease in the interest rate, which it will cause investment to decline and keep public finances unchanged. Assuming that both policies achieve the same result on GDP, in both cases the saving of the government remains constant. The fiscal policy will cause an increase in GDP and in the interest rate. therefore it will have an effect ambiguous in both investment and public finances.

Expert Solution

The monetary policy will cause GDP to increase and interest rates to decline, increasing investment (due to rightward shift of the LM curve). The fiscal policy will increase GDP as well as interest rate (due to the rightward shift of the IS curve), having an ambiguous effect on investment. The correct option is the last option.

Archived Solution
Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In
Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution
Get Custom Quote
Secure Payment