[Solved] The Multiplier Effect Refers to the Series of

To complement actions by the Bank of Canada to reduce inflation, the federal government can cut spending and/or raise taxes.

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2, graph aggregate demand, long-run aggregate supply, and short-run aggregate supply such that the condition of the economy will induce the federal government to conduct contractionary fiscal policy.Briefly explain the condition of the economy and what the federal government is attempting to do.

Table 12.6 -Refer to Table 12.6.The economy is in the state described by the table above.Draw the dynamic aggregate demand and aggregate supply diagram to illustrate the state of the economy in year 1 and year 2, assuming that no policy is pursued.Then illustrate and explain the appropriate fiscal policy to use in this situation.Assume that the policy results in the economy producing potential GDP.

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect. A)multiplier B)expenditure C)consumption D)aggregate demand E)Keynes

The aggregate demand curve will shift to the right ________ the initial increase in government purchases. A)by less than B)by more than C)by the same amount as D)sometimes by more than and other times by less than

The aggregate demand curve will shift to the left ________ the initial decrease in government purchases. A)by less than B)by more than C)by the same amount as D)sometimes by more than and other times by less than

The aggregate demand curve will shift to the right ________ the initial decrease in taxes. A)by less than B)by more than C)by the same amount D)sometimes by more than and other times by less than

Figure 12.11 Alt text for Figure 12.11: In figure 12.11, a graph depicting the total change in aggregate demand. Long description for Figure 12.11: The x-axis is labelled, real GDP (trillions of 2007 dollars), and the y-axis is labelled, price level (CPI).2 lines are shown; AD1 and AD2.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1, but is plotted to the right.Point A is plotted half way along line AD1.Point B is plotted approximately 3 quarters of the way along line AD2.Points A and B are connected with a dotted line, and the area between them is indicated by a right pointing arrow. -Refer to Figure 12.11.In the graph above, the shift from AD₁ to AD₂ represents the total change in aggregate demand.If government purchases increased by $50 billion, then the distance from point A to point B ________ $50 billion. A)would be equal to B)would be greater than C)would be less than D)may be greater than or less than

A change in consumption spending caused by income changes is ________ change in spending, and a change in government spending that occurs to improve roads and bridges is ________ change in spending. A)an induced; an autonomous B)an expansionary; a contractionary C)an autonomous; an induced D)a contractionary; an expansionary E)a discretionary; an automatic