Monetary and Fiscal Policy, Macroeconomic Fluctuations, and Macroeconomic Equilibrium1. Your Assignment should have a cover sheet with the following information:
? Your Name
? Course Number
? Section Number
? Date
2. You may submit your Assignment using the Unit 9 Assignment template.
3. Your answers should follow the APA format by being in double spaced paragraph format, with
citations to your sources and, at the bottom of your last page, a list of references. Your
answers should also be in Standard English with correct spelling, punctuation, grammar, and
style.
4. Respond to the questions in a thorough manner, providing specific examples of concepts,
topics, definitions, and other elements asked for in the questions. Your paper should be highly
organized, logical, and focused.
5. Required Format:
? Correct APA format for answers (cover sheet with name, course number, section number,
unit number, date, answers double spaced, in Times New Roman 12-point font).
Assignment
This Assignment will assess your knowledge based on the following outcome:
GEL-1.1: Demonstrate college-level communication through the composition of original materials.
As an assistant researcher in economics, your job is to analyze the impacts of the change in fiscal
and monetary policy instruments that accompany the change in economic conditions. When
aggregate demand or short-run aggregate supply curve shifts, it causes fluctuations in output
(GDP). As a result, policymakers sometimes try to offset these AD and AS curve shifts by using
monetary and fiscal policy instruments. With this in mind, address the Assignment questions on
the impacts of monetary and fiscal policies on aggregate demand and short-run macroeconomic
fluctuations. View the Chapter 21: “If It’s Better to have Higher Output and Lower Unemployment,
then Why Doesn’t the Government Use Monetary and Fiscal Policy to Expand Aggregate Demand
as Much as Possible?” video and the Chapter 22: “Is there Any Way to Measure “Expected
Inflation”?” video.
1. Refer to the sets of the aggregate demand, short-run aggregate supply, and long-run aggregate
supply curves. Use the graphs to explain the process and steps by which each of the following
economic scenarios will shift the economy from one long-run macroeconomic equilibrium to
another equilibrium. Under each scenario, elaborate the short-run and long-run effects of the
shifts in the aggregate demand and aggregate supply curves on the aggregate price level and
aggregate output (real GDP).
a. Suppose the household wealth decreases due to a decline in the stock market asset
prices (see the set of graphs below and pay attention to the 3-stage shifts in graphs[5] [6]).
b. Assume the government lowers taxes, which increases the household’s disposable
income. However, the government purchases (spending) remains the same (see the set of
graphs below and shifts in graphs).
2. Suppose the economy of a hypothetical country has reached its long-run macroeconomic
equilibrium when each of the following aggregate demand shocks occurs. What kind of gap,
inflationary or recessionary gap, will the economy face after the AD shock indicated by the shift in
AD curves? What types of fiscal policy instruments will help move the economy back to the
potential level of output (real GDP)? Give specific examples.
a. At the long-run macroeconomic equilibrium, the stock market boom occurs and this
increases the value of stocks households hold (see the set of graphs below and shifts in
graphs in the two-steps).
[ BU204 | Macroeconomics ]
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b. The government increases its purchases (spending) due to natural disasters (see the set
of graphs below and shifts in graphs).
c. Assume the Central Bank reduces the money supply in the economy which leads to an
increase in the interest rates (see the set of graphs below and shifts in graphs).
This Assignment deals with how monetary and fiscal policy instruments are utilized to deal with
macroeconomic fluctuations in order to achieve long-run macroeconomic equilibrium through
changing the aggregate demand (AD) and Aggregate Supply (AS) in the economy
Comments from Support Team: I can only send you the link for the videos and the chapter.
http://www.cengage.com/economics/discipline_content/mankiwanswersvideos/ch29.html
http://www.cengage.com/economics/discipline_content/mankiwanswersvideos/ch30.html