Other than as may be provided for in the debt provisions of this Constitution, the Governor, subject to such criteria as may be established by the General Assembly, shall ensure that no expenses of the Commonwealth be incurred which exceed total revenues on hand and anticipated during a period not to exceed the two years and six months period established by this section of the Constitution. No money shall be paid out of the State treasury except in pursuance of appropriations made by law and no such appropriation shall be made which is payable more than two years and six months after the end of the session of the General Assembly at which the law is enacted authorizing the same. What is the impact on a recession?Īll taxes, licenses, and other revenues of the Commonwealth shall be collected by its proper officers and paid into the state treasury. State balanced budget requirements (45 constitutional, 4 statute, and freakin' Vermont). Is the disagreement between Keynes and Hayek positive or normative? Explain.ġ1. According the Keynes, what should we do if the economy is at or above potential output?ĩ. According to Keynes, what should we do if the economy is below potential output?ħ. According to Keynes, what role does fiscal policy have in smoothing the business cycle?Ħ. What does the cyclically adjusted budget balance measure? What's the point?ĥ. Why do deficits increase in a recession? You need more than one answer.Ĥ. Explain why government spending has a greater impact on the economy than tax cuts or raises even if they have the same impact on the budget balance.ģ. Define the terms of the following equation: S of Gov = T - G - TRĢ. What a resource! It's where I get the FRQs for the tests!ġ. Generally used to show situation in the economy.Īlso: Note the link above. Usually only a two point section of a 12 point question with a mean score of 5. (c) What is the effect of the increase in the expected rate of inflation on the long-run Phillips curve? (b) Using your graph in part (a), show the effect of an increase in the expected rate of inflation. (a) Draw a correctly labeled graph of a short-run Phillips curve. Inflation and expected inflation are important determinants of economic activity. What will happen to each of the following as theĮconomy approaches a new long-run equilibrium? (f) Assume that the Federal Reserve action is successful. (e) How will the interest rate change you identified in part (d) affect aggregate demand in the short run? In part (c) will affect the nominal interest rate. (d) Using a correctly labeled graph of the money market, show how the Federal Reserve’s action you identified Operation should the Federal Reserve undertake? (c) Assume now that the Federal Reserve decides to target an inflation rate of 3 percent. (b) Calculate the real interest rate in the long-run equilibrium. Numbers from above, show the current long-run equilibrium as point A. (a) Using a correctly labeled graph with both the short-run and long-run Phillips curves and the relevant Assume that the United States economy is in long-run equilibrium with an expected inflation rate of 6 percentĪnd an unemployment rate of 5 percent. Label the initial position “A” and the new position “B”.ġ. (a) Using a correctly labeled graph of the short-run Phillips curve, show the effect of the decrease inĬonsumption spending. A drop in consumer confidence reduces consumption spending, causing the economy to enter into a Assume the United States economy is operating at full-employment output and the government has a balancedīudget.
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