Economics HW help!!!! =/

Question

5. Coinciding with the U.S. economy entering recession in 2001, Congress passed some tax cuts and voted to increase expenditure on homeland security.

a. Would you describe the Congress's actions as a feedback-rule policy, a fixed-rule policy, or neither?

I chose feedback rule?

b. What do you predict the effects of Congress's actions would be on real GDP and the price level?

wouldnt the actions increase real GDP and lower price level?

Answer 1

#5.

a. feedback-rule policy

#6.

b. RGDP increases (short-run) closer to potential level may be even above but not too high beyond it.

Price level will not change (in very-very-short-run), then will gradually start to increase (in average-short-run), and final price level could be higher than initial (in long-run).