Applied Economics Essay Example | Topics and Well Written Essays - 1750 words

Applied Economics - Essay ExampleThere is a positive correlational statistics between the aggregate rent and the changes in fiscal policy. If the government wants to increase the quantity or the release of specie in its economy so it undertakes an expansionary monetary policy and similarly if it wants to reduce the quantity of currency in the economy it adapts a contractionary monetary policy. (Case & Fair, 2002)3 This office that if the quantity of money increases in the economy then the aggregate take up shifts outwards or to the right, i.e. more output is demanded at the same determine. Conversely, if the supply of money shrinks in the economy then the aggregate demand shifts inward or to the left as a result of a decrease in demand of output at all the various levels of damage in the economy. Graphically it can be as followsCase & Fair (2002) explain that when the quantity of money increases in the economy then the interest rates decline due to which the cost of carry ing out planned investment decreases and therefore there is higher investment expenditure. This in turn increases the output at each price level and the opposite happens when the quantity of money decreases in the economy.4The government also demands the output in terms of goods and services. ... If the government wants to increase the quantity or the supply of money in its economy then it undertakes an expansionary monetary policy and similarly if it wants to reduce the quantity of money in the economy it adapts a contractionary monetary policy. (Case & Fair, 2002)3 This means that if the quantity of money increases in the economy then the aggregate demand shifts outwards or to the right, i.e. more output is demanded at the same price. Conversely, if the supply of money shrinks in the economy then the aggregate demand shifts inward or to the left as a result of a decrease in demand of output at all the various levels of price in the economy. Graphically it can be as followsCase & F air (2002) explain that when the quantity of money increases in the economy then the interest rates fall due to which the cost of carrying out planned investment decreases and therefore there is higher investment expenditure. This in turn increases the output at each price level and the opposite happens when the quantity of money decreases in the economy.4Therefore, the changes in the AD can be summed up as follows according to the changes in the quantity of moneyIncrease in the supply of money - Aggregate Demand shifts to its right.Decrease in the supply of money - Aggregate Demand shifts to its left.3. Fiscal PolicyFiscal policy includes two componentsGovernment outlay and expenditure.Changes in the taxation policy by the government.3.1 Government spend and expenditureThe government also demands the output in terms of goods and services. Therefore, a change in the government spending or purchases influences the aggregate demand. Government spending and