Exam 4

Exam 4

Due Date: December 7, 2017 12:00 noon. Each question is equally weighted in value. Late penalties of 10% per 24 hour period will be assessed.

1. Explain the fiscal policy tools available to governments to alter macroeconomic activity. Your answer should include both depth and breadth and should include a discussion of the multiplier process and how that works through the economy. Include in your explanation how fiscal policy can be used to help correct a $1 Trillion recessionary gap assuming an MPC of 0.80.

2. Explain the Monetary policy tools available to governments to alter macroeconomic activity. Your answer should include both depth and breadth and should include a discussion of the monetary policy transmission mechanism and how that works through the economy. Include in your explanation how monetary policy can be used to help correct a $1 Trillion inflationary gap. General directions of change are sufficient and no specific calculations are required for this portion of the exam.