Author Question: Other things constant, what is the outcome of expansionary fiscal policies on employment, inflation, ... (Read 53 times)

imowrer · **on:** Jun 30, 2018

Other things constant, what is the outcome of expansionary fiscal policies on employment, inflation, real output, and deficits in the short-run?

Question 2

Suppose a bank has 850 million in vault cash and a deposit in the Fed of 100 million. If the bank's required reserves equal 500 million, then the bank has excess reserves of:
a. 100 million.
b. 350 million.
c. 400 million.
d. 450 million.
e. 500 million.

tuwy · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

The expansionary policy will lead to an increase in AD which will lead to an increase in real output, a decrease in unemployment, and an increase in inflation. Ceteris paribus, the increase in government purchases and/or decrease in taxes will lead to an increase in the deficit.

Answer to Question 2

d