complete the following table for a static ad - as model:\n| problem | policy | actions | result…
complete the following table for a static ad - as model:\n| problem | policy | actions | result |\n|--|--|--|--|\n| recession | expansionary | ↑govt spending or | real gdp and price level |\n| rising inflation | contractionary | | gdp and price level |
Answer
Explanation:
Step1: Analyze recession - expansionary policy
During a recession, an expansionary policy aims to boost the economy. One way is to increase government spending or decrease taxes. This increases aggregate demand, leading to an increase in real GDP and price level.
Step2: Analyze rising - inflation contractionary policy
For rising inflation, a contractionary policy is used. The government can either decrease government spending or increase taxes. This reduces aggregate demand, causing a decrease in real GDP and price level.
Answer:
| Problem | Policy | Actions | Result |
|---|---|---|---|
| Recession | Expansionary | $\uparrow$ Gov't spending or decrease taxes | $\uparrow$ Real GDP and price level |
| Rising inflation | Contractionary | $\downarrow$ Gov't spending or increase taxes | $\downarrow$ Real GDP and price level |