Please Respond To The Following Image That The Mayor Has Hir

Question

Please Respond To The Followingimage That The Mayor Has Hired You As Please respond to the following: Image that the mayor has hired you as a consultant to evaluate the increase in aggregate demand in the city where you live. Describe to the mayor one (1) aggregate demand and supply factor that would have the greatest impact on the economy of your city. Determine what fiscal policy measure has a more direct impact to the economy, an increase in government spending or an equal decrease in taxes if consumer confidence is lower than the previous month. Explain your reasoning. Just need a short answer not a paper.

Dr. Jack HW Helper · Accepted Answer

As a consultant hired by the mayor to evaluate the impact of changes in aggregate demand on our city’s economy, I would identify consumer confidence as a key factor influencing aggregate demand. When consumer confidence increases, residents are more likely to spend money, boosting demand for goods and services. Conversely, lower consumer confidence discourages spending, which can significantly slow economic growth. In the current context where consumer confidence is declining, fiscal measures should be targeted at stimulating demand. Between increasing government spending and decreasing taxes, increasing government spending would likely have a more immediate and direct impact in this situation. An increase in government expenditure directly injects funds into the local economy, creating jobs and encouraging consumption. This approach can have an immediate multiplier effect, stimulating demand even when consumer confidence is low. Conversely, decreasing taxes, although beneficial in theory, might not induce significant immediate spending if consumers are wary about the economy’s prospects and choose to save additional income rather than spend it. Therefore, in a scenario of low consumer confidence, increasing government spending would be the more effective fiscal policy to boost aggregate demand promptly and stabilize the local economy. It directly addresses the demand shortfall and helps prevent economic slowdown by providing immediate economic stimulus. References - Mankiw, N. G. (2020). Principles of Economics (9th ed.). Cengage Learning. - Blanchard, O., & Johnson, D. R. (2013). Macroeconomics (6th ed.). Pearson Education. - Keynes, J. M. (1936). The General Theory of Employment, Interest, and Money. Palgrave Macmillan. - Romer, D. (2012). Advanced Macroeconomics (4th ed.). McGraw-Hill Education. - Federal Reserve Bank of St. Louis. (n.d.). Fiscal Policy. Retrieved from https://www.stlouisfed.org - Congressional Budget Office. (2023). The Impact of Fiscal Pol

Please Respond To The Followingimage That The Mayor Has Hired You As

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