This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: What are the components of fiscal policy? Explain how fiscal policy affects aggregate demand. ... (Read 472 times)

neverstopbelieb

  • Hero Member
  • *****
  • Posts: 534
on: Jun 29, 2018
What are the components of fiscal policy? Explain how fiscal policy affects aggregate demand.
 
  What will be an ideal response?

Question 2

What role can the Fed play in the foreign exchange market?
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

ankilker

  • Sr. Member
  • ****
  • Posts: 328
Reply #1 on: Jun 29, 2018
Answer to Question 1

Fiscal policy affects aggregate demand through government expenditure, transfer payments and taxes. Because government purchases are a component of total spending, a change in government expenditure directly changes aggregate demand. A change in transfer payments changes disposable income which, in turn, changes consumption expenditure and aggregate demand. Finally, taxes alter disposable income and thus impact consumption expenditure and aggregate demand.

Answer to Question 2

The Federal Reserve can intervene in the foreign exchange market by (temporarily) selling or buying dollars. If the Fed sells dollars, it drives the exchange rate lower and if the Fed buys dollars, it drives the exchange rate higher. The Fed cannot buy dollars forever because it will run out of the foreign exchange it using to buy the dollars. And, the Fed likely will not want to sell dollars forever because it would accumulate ever increasing amounts of foreign exchange.


neverstopbelieb

  • Member
  • Posts: 534
Reply 2 on: Jun 29, 2018
Gracias!

duy1981999

  • Member
  • Posts: 341
Reply 3 on: Yesterday
:D TYSM

« previous next »
 

Did you know?

About 600,000 particles of skin are shed every hour by each human. If you live to age 70 years, you have shed 105 pounds of dead skin.

Did you know?

More than 20 million Americans cite use of marijuana within the past 30 days, according to the National Survey on Drug Use and Health (NSDUH). More than 8 million admit to using it almost every day.

Did you know?

The tallest man ever known was Robert Wadlow, an American, who reached the height of 8 feet 11 inches. He died at age 26 years from an infection caused by the immense weight of his body (491 pounds) and the stress on his leg bones and muscles.

Did you know?

Many people have small pouches in their colons that bulge outward through weak spots. Each pouch is called a diverticulum. About 10% of Americans older than age 40 years have diverticulosis, which, when the pouches become infected or inflamed, is called diverticulitis. The main cause of diverticular disease is a low-fiber diet.

Did you know?

About 3% of all pregnant women will give birth to twins, which is an increase in rate of nearly 60% since the early 1980s.

Pott’s Occurs at the ankle and affects both bones of the lower leg (fibula and tibia) Pott’s Occurs at the ankle and affects both bones of the lower leg (fibula and tibia)
Components of critical thinking in nursing Components of critical thinking in nursing
How Alzheimer's Affects the Brain How Alzheimer's Affects the Brain
Components of Weight Gain during Pregnancy Components of Weight Gain during Pregnancy
A comparison of the components in prokaryotic and eukaryotic ribosomes A comparison of the components in prokaryotic and eukaryotic ribosomes
Overview of the components of the human digestive system, together with a brief description of their Overview of the components of the human digestive system, together with a brief description of their
Video: Corpus Callosum Animation

For a complete list of videos, visit our video library