Purchase Solution

Macroeconomic Principles and Policy

Not what you're looking for?

Ask Custom Question

Assuming the economy is already in a recession, and both the president and congress have decided to do something to restore the economy. Both agree that lowering taxes would not be a good idea, but do believe that it is in the best interest of the economy to increase government spending in defense, education and infrastructure.

The president and congress change the budget accordingly, but after 18 months, GDP only increased by three quarters of the expected amount. What factors might be responsible for this situation?

Purchase this Solution

Solution Preview

While Gross Domestic Product (GDP) has been used as an indicator of national progress in most of the world, it isn't a perfect reflection of the state of the economy. It measures only expenditures, regardless of their reasons. Thus, unemployment may have no effect on GDP, and the contribution made by household or volunteer work are ignored. In addition these statistics are often flawed. See http://www.shadowstats.com/cgi-bin/sgs? for an opinion of how far off they may be. Many negative things, such as divorce and crime, serve to increase GDP. ...

Purchase this Solution


Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.