Question
outlining the state of the macroeconomy and explaining how fiscal policy can be used to improve it. Specifically, you are to play the role of
outlining the state of the macroeconomy and explaining how fiscal policy can be used to improve it. Specifically, you are to play the role of a junior economic statistician at Statistics Canada, and one of your tasks is to analyze and interpret economic data and report on the Canadian macroeconomic situation. Go ahead and read the scenario. Good luck! Scenario You are employed by Statistics Canada as a junior economic statistician, and you subscribe to the modern view of how the macroeconomy works. Your boss, the chief economic statistician, is preparing for an important meeting with the Minister responsible for Statistics Canada to discuss the state of the country's economy. Among the matters to be discussed are the country's macroeconomic performance and how fiscal policy can help to improve it. Since the chief economic statistician is extremely busy with other issues, you have been asked to provide some of the information required for the meeting.
The following economic data are available to you. Cyclical unemployment is at 4%.
$million
Rent 30
Household consumption expenditure 1,500
Corporate income taxes 80
Undistributed profits 20
Net exports 10
Dividends 40
Consumption of fixed capital (depreciation) 200
Interest 90
Indirect business taxes fewer subsidies 180
Compensation for employees 1,420
Government consumption expenditure 400
Proprietors' income 100
Specifically, to prepare for this meeting, the chief economic statistician wants you to:
Calculate the income-based GDP.
Calculate the expenditure-based GDP.
Calculate investment. (d) Calculate the recessionary gap.
Use the AD/AS model to explain how an appropriate fiscal policy can be used to attain potential GDP.
In addition to the above tasks, the chief economic statistician has asked you to remark on the main problems of huge public debt caused by fiscal policy, which will also be discussed at the meeting. You are to present your report to the chief economic statistician
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