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Why do classical or monetarist schools of economic thought maintain that monetary stimulus is doomed to be ineffective in the long run?
I think that you meant "fiscal stimulus" because this is what the monetarists oppose. Monetarists hold that the doctrine of monetary neutrality fixes long-run aggregate supply. On a graph, the long-run aggregate supply appears as a vertical line and is influenced only by real variables such as the natural rate of employment, resource base, technology, etc. A fiscal stimulus acts on the short-run aggregate demand by temporarily pushing the economy above its real potential through the use of government spending and the multiplier effect (1/1-Marginal Propensity to Consume).
Monetarists oppose such actions for a number of reasons. First, when the government has to finance a large fiscal stimulus and does not raise taxes, bigger budget deficits occur, which negatively impacts public saving. As such, aggregate supply in the loanable funds market falls and "crowds out" investment by raising the equilibrium interest rate and decreases the amount of available funds. This effect also dampers the strength of the multiplier effect on aggregad
Also, the economy is only temporarily pushed above potential. In the long-run, only inflation will result from the stimulus.
Other concerns Monetarists have include the issue of lags, especially the implementation lag. By the time a stimulus passes and is put into action, the economy might already reach its trough and start expanding. If fiscal policy is introduced at the wrong time, there are serious inflation risks.
What else can I help you with?
Why do communist countries use authoritarian methods to maintain their economic and political systems?
To maintain control of the economy and the people that live there.
In an economic function what is equity?
In an economic function, equity is when the appointment of resources is considered fair. Government economic functions include providing public services and maintain a national defense.
Describe the main tasks faced by an economic system.How these tasks can be solved?
Some of the main tasks faced by an economic system are: What goods to produce? What combination of inputs to use? How to use resources? Present time versus future Who will consume? How to maintain economic growth?
What is a goal of federal economic policy?
The goal of a federal economic policy is to create a healthy economy in the country that benefits every citizen. The goals of federal economic policy include: maintain stable prices, full employment, economic growth.
What is the term used to describe the set of cultural beliefs and practices that helps to maintain powerful social economic and political interests?
the dominant ideology.
How long does live bait last before it becomes ineffective for fishing?
Live bait typically lasts for a few hours before it becomes ineffective for fishing. It is important to regularly check and replace the bait to maintain its effectiveness in attracting fish.
What are not a goal of federal economic policy?
maintain stable prices, full employment, economic growth
Why do communist countries use authoritarian methods to maintain their economic and political systems?
To maintain control of the economy and the people that live there.
Did Hamilton like the articles of confederation Why or why not?
No, Alexander Hamilton did not support the Articles of Confederation. He believed they created a weak central government that was ineffective in addressing economic and political challenges facing the new nation. Hamilton argued for a stronger federal government to ensure stability, promote commerce, and maintain order, which ultimately led to his advocacy for the Constitutional Convention in 1787.
How did the Articles of Confederation deal with the economic conditions?
They tried to tax the colonies, but were not able to maintain the economy. Led to weak economic conditions.
In an economic function what is equity?
In an economic function, equity is when the appointment of resources is considered fair. Government economic functions include providing public services and maintain a national defense.
How did classical civilizations gain consolidation maintain and lose their power?
Classical civilizations gained power through military conquest, strategic alliances, and the establishment of trade networks that facilitated economic growth. They maintained their power by implementing bureaucratic systems, promoting social cohesion through shared cultures and religions, and investing in infrastructure like roads and public works. However, they often lost power due to internal strife, corruption, overextension of resources, and pressures from external invasions or rival states. Ultimately, a combination of these factors led to the rise and fall of classical empires.
What statement best describes Herbert hoovers first response to the nations economic crisis?
the government should allow the depression to progress naturally
How did the Democratic Party maintain power in the S's?
By providing economic relief during the great depression.
How did the Democratic maintain power in the 1930's?
By providing economic relief during the great depression.
What was good about having cuneiform?
It allowed the people to keep track of economic things and maintain records.
Why is it important to observe Economic order quantity?
To maintain optimum level of inventory and to reduce working capital
