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Try to answer each of the questions on a piece of paper. When you are finished, watch the videos next to each question to get the solution. These will only be as helpful as you make them. Answer first, watch second.
Try to answer each of the questions on a piece of paper. When you are finished, watch the videos next to each question to get the solution. These will only be as helpful as you make them. Answer first, watch second.
1
1
Suppose the economy is in a recession, and according to economists the recessionary gap is $2.5 trillion. They estimate the MPC is 0.75. How much money does the government need to spend in order to bring the economy back to full employment?
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2
Why does the Permanent Income Hypothesis mean that a tax rebate (lower taxes this year, but paid back with higher taxes next year) is unlikely to boost GDP?
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3
In 2008, the economist Ben Bernanke was urging congress to pass the Emergency Economic Stabilization Act immediately after putting the proposal together. The Speaker of the House asked why they couldn't wait a few days. What policy lag was Ben Bernanke trying to minimize?
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4
Look at the graph below. Does it show a recessionary gap or an inflationary gap? What fiscal policies could the government implement to close this gap?
Module 8 Quick Quiz
Module 8 Quick Quiz
Now that you have watched all the videos and tried all of the example problems, see how you do on this short quiz. If you score under 75%, consider reaching out to your course instructor for some advice.
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