--%>

Governments fiscal policy options for an inflationary gap

Describe government’s fiscal policy options for an inflationary gap?  Employ the aggregate demand-aggregate supply model to illustrate the impact of these policies on the price level. 

E

Expert

Verified

Options are to decrease government spending, raise taxes, or some combination of both. If the price level is flexible downward, it will drop.  In the real world, the goal is to drop inflation—to keep prices from increasing so rapidly—not to decrees the price level. 

   Related Questions in Finance Basics

  • Q : Describe advantages and the

    Describe advantages and the disadvantages of new stock issue? A new stock issue increase funds and decreases the riskiness of the firm. This also tends to send a negative signal to the market as many investors believe a company would just sell

  • Q : How do financial managers compute the

    How do financial managers compute the average tax rate?Average tax rates are calculated through dividing tax dollars paid by earnings before taxes (EBT).

  • Q : Order Quantity-Cycle Inventory-Safety

    Consider the following data pertaining to a distribution center.

    Q : Define Legislative Counsel Digest

    Legislative Counsel Digest: The summary of what a legislative measure does contrasting the existing law and the proposed change. This summary emerges on the first page of the bill.

  • Q : Describe free cash flows Describe "free

    Describe "free cash flows?" It represents the total cash flows from business operations which are obtainable to be distributed to the suppliers of a firm's capital each year either within the form of interest to the debt holders, or dividends to

  • Q : Computing the amount of excess reserves

    Normal 0 false false

  • Q : None what are the disadvantages of

    what are the disadvantages of working capital

  • Q : Question on price level Normal 0 false

    Normal 0 false false

  • Q : Define Subventions Subventions :

    Subventions: Typically employed to explain amounts of money expended as local assistance based on the formula, in contrast to grants which are provided selectively and frequently on a competitive basis. For the aim of Article XIII B, state subventions

  • Q : Define Financial Planning Financial

    Financial Planning: It is a comprehensive assessment of an investor's present and future financial state by employing presently known variables to forecast future cash flows, asset values and the withdrawal plans.