Part 1: Assume that the country is in a period of high unemployment interest rates are at almost zero inflation is about 2% per year and GDP growth is less than 2% per year. Suggest how fiscal and monetary policy can move those numbers to an acceptable level keeping inflation the same. What is the first action you would take as the president? As the chairman of the Fed? Why? What would be your subsequent steps? Make sure you include both the positive and negative effects of your actions and include the trade-offs or opportunity costs. Include the following concepts in your discussion: Demand and supply of moneyInterest ratesThe Phillips curveTaxationGovernment spendingWagesCosts of inflationThe multiplier and the tax multiplierThe idea of tax rebates to stimulate the economy Part 2: Assume the country is in a budget deficit and carrying a very large debt. Discuss the dangers of a high debt to GDP ratio and a growing budget deficit. Would this change any policy changes you discussed in Part 1?

Categories: Uncategorized


Leave a Reply

Your email address will not be published. Required fields are marked *