Explain briefly how a contractionary gap OR an expansionary gap is f.pdf

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Explain briefly how a contractionary gap OR an expansionary gap is formed (choose one; cite clearly which of the two you are explaining, and don’t just give a definition of each--say why they are formed). Solution it is a form of fiscal policy in where government spending will be minimize and tax collections are maximized, and it used to correct inflationary problems in a business cycle expansions. the goal of contractionary fiscal policy is to close an inflationary gap, restrain the economy, and decrease the inflation rate. contradictionary fiscal is often supported by contradictionary monetary policy. in general contractionary fiscal policy works in twol different sides of the governent budget, i.e. government spending and tax collections. when the inflation rates are high, then governments have to take some steps to correct the inflation rates..

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Broadly speaking, the economy consists of households, firms, government, and financial institutions. Name two parts, areas, or types of government that can have influence over the economy Solution Explanation: - Financial policy: Monetary Policy of any government can have major impact on economy of a nation since it has the power to stimulate the economy and change the way economy behave. Financial policies are performing major part in economy and it can make or break economy. How the taxes are levied can majorly impact economy. Financial policies move control the flow of the money and it can inject new money flow in system to revive it. - Fiscal Policy: Another major player in stimulating and impacting economy at it best is fiscal policy. Fiscal policy mainly works to overcome from struggling economy and reduce the inflation in market. Interest rate is popular tool to control the flow money through changing interest rates..

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Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. These two policies are used in various combinations to direct a country's economic goals. Here we look at how fiscal policy works, how it must be monitored and how its implementation may affect different people in an economy.

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How do government policies and/or regulations factor into changes in economic activity on both a domestic and global scale? Give a specific example of a policy or regulation that has helped economic activity. Give a specific example of a policy or regulation that has hindered economic activity. If you were an economist who was tasked with evaluating this policy or regulation, what are some ideas you would suggest for changing it in a way that would achieve the same goal but not hinder economic activity? Finally, state whether or not you enjoy these types of evaluations and if you would consider these types of responsibilities in a future career. Solution Monetary policy is by far the most powerful weapon in the government’s arsenal. Unfortunately, it is also the most imprecise. The government can do some fine control with tax policy to move capital between investments by granting favorable tax status On the whole, governments tend to go for large, sweeping changes by altering the monetary landscape. Governments are the only entities that can legally create their respective currencies. Interest rates are another popular weapon, even though they are often used to counteract inflation. They can spur the economy separately from inflation. Pumping in money feels good for a while, especially for investors who see corporate profits and share prices shooting up, but the long-term impact is an erosion of value across the board. Savings are worth less, punishing savers and bond buyers Government programs provide valuable \"public goods\" such as education and infrastructure. Inreases in government spending can bolster economic growth by putting money into people\'s pockets. I believe the policy of QE (quantiative easing) during times of recession to bring back a shattered economy in place. An automatic reversal will never happen, and it is imperative on the part of government is follow such prudent measures. I would consider these types of responsibilites in a long-term perspective. *****.

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