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Managerial Economics: Fiscal Policy, Monetary Policy and Taxation

Answer BOTH questions. Each question carries equal weighting. This is a take home exam or assignment for the BUS702 Economics for Managers course. The deadline for uploading the answers is Friday 12 October by 11:59 pm.

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Added on  2023-06-04

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This article discusses the concepts of Fiscal Policy, Monetary Policy and Taxation in Managerial Economics. It explains the impact of government spending, tax rates, interest rates and subsidies on the economy. The article also covers the effectiveness of taxation and subsidy measures on unhealthy and healthy food products.

Managerial Economics: Fiscal Policy, Monetary Policy and Taxation

Answer BOTH questions. Each question carries equal weighting. This is a take home exam or assignment for the BUS702 Economics for Managers course. The deadline for uploading the answers is Friday 12 October by 11:59 pm.

   Added on 2023-06-04

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Running head: MANAGERIAL ECONOMICS
Managerial Economics
Name of the Student
Name of the University
Course ID
Managerial Economics: Fiscal Policy, Monetary Policy and Taxation_1
1MANAGERIAL ECONOMICS
Table of Contents
Question 1........................................................................................................................................2
Question a....................................................................................................................................2
Question b....................................................................................................................................3
Question c....................................................................................................................................3
Question d....................................................................................................................................4
Question 2........................................................................................................................................4
Managerial Economics: Fiscal Policy, Monetary Policy and Taxation_2
2MANAGERIAL ECONOMICS
Question 1
Question a
J. M. Keynes provided the simple idea of reviving economic activity through fiscal
stimulus given by the national government. Keynes stressed an increase in government
expenditure or low tax rate help to boost economic activity through pulling up aggregate
demand. The Keynesian theory attempted to offer demand side solution to the problem of
recession. As government increases total spending people has a greater opportunity to save more.
This in turn helps to revive the depressed private saving.
Figure 1: Effect of an increase in total spending
Government spending being one of the components of aggregate demand, an increase in
government spending leads to an increase in aggregate demand. This in turn causes in an
increase in GDP and price level.
Managerial Economics: Fiscal Policy, Monetary Policy and Taxation_3

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