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Naked Economics Chapter 1

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Chapter 11 1. Fiscal policy can be described as the use of government purchases, taxes, transfer payments, and government borrowing with an objective of influencing economy-wide variables such as the employment rates, the economic growth, and the rates of inflation (McEachern, 2015). 1. When all other factors are held constant, a decrease in government purchases will lead to an increase in the real GDP demanded 2. An increase in net taxes, holding other factors constant, will lead to an increase in the real GDP demanded. 3. A reduction in transfer payments when all other factors are held constant will have no effect in the real GDP demanded. 4. A decrease in the Marginal propensity to consume will decrease consumption spending and therefore, decrease the GDP …show more content…

Tax cuts reduce the recessionary gap. Therefore, in order to eliminate the recessionary gap, there is need for falling tax collections i.e. tax cuts. 9. Classical economists assumed that the market forces through flexible prices, wages, and interest rates would move the economy toward potential GDP (McEachern, 2015). The assumption economists believed that natural market forces such as changes in prices, wages and interest rates could correct the problem of the market, thus the market is self-correcting. Keynesian economists believed that the economy is well controlled by manipulating demand for goods and services. According to Keynesian theory, wages and prices are not flexible. Chapter 12 2. The budget requires the forecast of the economy so as to have a correct knowledge of how much tax revenue it will be needed and how much it will have to spend in order to ensure maximum performance. The budget also requires forecast in order to monitor the spending on different points of the business cycle. 5. The federal debt has tremendously increased as a measured relative to GDP since 2008. 8. A. Assuming an initial gross national debt of $3trillion and a $300 billion deficit by the federal

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As we take account for the things produced, also keep in mind some things cannot be included in GDP. First GDP excludes non production transaction and another thing that is not accounted for are shortcoming of GDP. Non production item include paper for paper, or as the text states, financial transactions. Also excluded are secondhand sales. The paper for paper money

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The second half to Charles Wheelan’s first chapter of Naked Economics: Undressing the Dismal Science, is much like it’s first half. However, it comes off as more abridged. Wheelan talks about more things at a lesser scale in the last ten or so pages than he did in the first sixteen. It still conveys the same message started in the first, a brief introduction to economics. Some of the topics mentioned are that even with fixed prices firms will find other ways to compete and how transactions make everyone better off.

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In chapter three the book address what a state is. Readers will learn about the many factors that contribute to how a state functions. Throughout chapter 3 the reader will learn about the modern state and how state capacity determines how states will achieve political goals. This is an important part of comparative politics that the reader must understand before reading further into the book. Without a strong foundation as to what a state is and how it functions a reader will not be able to understand modern politics.

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I am amused by the answers provided here. The most amazing thing is no one have any idea about how economics work. I am not an economics expert, but this is the probably first thing you'll be taught in economics after demand/supply curve. Currency prices works like an index of prosperity in the respective nation.

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The Twilight of the Old Consensus, ' ' Gordon provides a trace of the fiscal policy after the end of World War 1 and how it led to the shock experienced during the Great depression. Finally, in ' 'Keynesianism and the Madison Effect, ' ' Gordon argues that after the end of World War 2, economists relied on Keynesian deficit-spending theory to dictate fiscal and monetary policy. These chapters have been used to sum up the

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During this period, inflation was high and economic growth was low (Niskanen, 2002). To close a recessionary gap, you must increase aggregate demand. Reagan believed that through his trickle-down theory he could achieve this. However, not everyone agreed, though. Congress wearily accepted a 25% tax cut during Reagan’s first term (ushistory.org, 2016).

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Module 1 Study Guide Chapter 1 1. What is the difference between a. and a. What is the discipline of economics study? In your answer, use at least four of the following five terms: economics, scarcity, division of labor, specialization, economies of scale. The study of how societies distribute their finite resources to satisfy their needs and desires in the face of scarcity is known as economics. An essential idea in economics, scarcity signifies that resources are restricted compared to the limitless demands and requirements of people and society.

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Specifically, when there are fluctuations to taxes, high unemployment rates and government spending on goods and services. Therefore, when the government applies expansionary fiscal policy it affects all Australians as it seeks to expand the amount of money available to the population to encourage economic growth (Investopedia, 2018). This has positive effects on the GDP and private investments as this increase in money supply allows consumers to pay less tax. This results in more disposable income and successively allows consumers to spend more causing an increase in the demand and supply of goods and services. This subsequently allows business to make capital expenditure and therefore decreases the number of

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There is not enough financial investment and the government begins to compete with the private sector for this finance because of the government’s deficit spending. The competition between the government and the public sector drives the interest rates which causes financial institutions to invest less which then leads to a fall in the economy. (Thoma, 2011) A fall in the economy means that people will spend less and be more causes which can then in turn cause for more deficit spending to boost the economy.

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1. Define fiscal policy. Include the goals and tools of fiscal policy and the entity that controls it. Fiscal Policy is when the government uses our tax dollars and also borrow from other countries to meet our economic goals. The tools are taxing and spending.

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Classical and Keynesian economic theories translate directly into American politics and fiscal public policy. There are stark contrasts with the Republican’s belief in the classical economic theory and the Democrat’s position to implement fiscal spending based on the Keynesian approach to economic stimulation. This is evident in the presidencies of Ronald Reagan and Barack Obama. The Keynesian approach to influence economic growth has left our country severely in debt without a sound fiscal vision to pay down the national debt to an acceptable level. Both economic theories have their advantages when the economic markets are struggling, finding a balance to debt management and economic soundness is the key to any nation’s economic policy.

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First, they believe that demand as a whole is influenced by an array of economic decisions and sometimes behaves unpredictably. Secondly, changes in demand, both anticipated and unanticipated, have their most impactful short-run effect on output and employment (Blinder). Third of all, Keynesians believe that prices respond slowly to changes in supply and demand. This would result in temporary and fluid shortages and surpluses. Finally, some Keynesians are more concerned about fixing unemployment rates than about conquering inflation (Blinder).

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Definition: Fiscal policy is the government spending and taxation that influences the economy. Elected officials should coordinate with monetary policy to create healthy economic growth. They usually don't. Why? Fiscal policy reflects the priorities of individual lawmakers.

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Keynesian economic theory relies on spending and aggregate demand to define the economic marketplace. Keynesian economists believe the aggregate demand is

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Everything else held constant, a decrease in the excess reserves ratio causes the M1 money multiplier to ________ and the money supply to ________. A) decrease; increase B) decrease; decrease C) increase; decrease D) increase; increase 15) Assuming initially that rr = 15%, c = 40%, and e = 5%, an increase in e to 10% causes the M1 money multiplier to ________, everything else held constant. A) decrease from 2.33 to 2.15 B) increase from 2.15 to 2.33 C) decrease from 1.67 to 1.54 D) increase from 1.54 to 1.67 16) During the bank panics of the Great Depression the currency ratio A) decreased sharply. B) increased slightly.

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