Blueland is passing through a recession. How can the government of Blueland use fiscal policy to improve the economic condition of the country?
What will be an ideal response?
The government can use fiscal policy to shift the labor demand curve to the right during a recession. Increasing spending increases the demand for the products that firms produce, shifting the labor demand curve to the right. Decreasing taxes give firms and consumers more after-tax income, thereby increasing their purchasing power and increasing demand for the products that firms produce, shifting the labor demand curve to the right.
You might also like to view...
A cartel is a group of firms that: a. agree to increase industry output in order to boost profits
b. agree to restrict industry output in order to boost profits. c. agree to differentiate their products from one another. d. together control a significant portion of an industry's output, but fail to consider the behavior of rivals when making decisions.
If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost
a. True b. False Indicate whether the statement is true or false
When prices are used as a rationing device, goods that are relatively more scarce than they used to be will have
A) greater demand. B) lower excess demands. C) higher prices. D) long queues.
Product differentiation can lead to gains in economic welfare.
Answer the following statement true (T) or false (F)