Author Question: If Table 12.2 represents all the investments available to the economy, the nominal interest rate is ... (Read 108 times)

chads108 · **on:** Jun 30, 2018

If Table 12.2 represents all the investments available to the economy, the nominal interest rate is 2.5 percent and there is no inflation, what will be the level of investment in the economy?

A) 0 B) 200 C) 600 D) 900

Question 2

Blueland is passing through a recession. How can the government of Blueland use fiscal policy to improve the economic condition of the country?

What will be an ideal response?

mistyjohnson · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

D

Answer to Question 2

The government can use fiscal policy to shift the labor demand curve to the right during a recession. Increasing spending increases the demand for the products that firms produce, shifting the labor demand curve to the right. Decreasing taxes give firms and consumers more after-tax income, thereby increasing their purchasing power and increasing demand for the products that firms produce, shifting the labor demand curve to the right.