Explain the appropriate discretionary fiscal policy

Reference no: EM1373728

The economy has seen unemployment rate raise from 6% to 9.5%, the inflation rate decrease from 2.8% to 1.2%, and there has been a 24% decline in consumer spending and a 45% decline in investment spending in the same time period.

a) Given the above, what would you predict about the overall direction of the economy?

b) Explain the appropriate discretionary fiscal policy that the government should adopt, given the above condition.

c) Describe the appropriate monetary policy that the central bank should be operating, given the above condition.

Reference no: EM1373728

Questions Cloud

Exercising the application of a mandatory retirement age : Discuss the logic of a company setting and exercising the application of a mandatory retirement age and determine the pros and cons of the mandatory retirement practice from the perspective of the organization, economy, individual, or Nation?

High employment deficit : The high employment deficit is estimated at $100 billion. Suppose that the ecomony is operating below full employment and that it will not overheat during year,

Discussion on behavior of profit maximizing firms : The number of repairs manufactured by a computer repair shop depends on the number of employees as given follows:

Fit possible statistical cost functions to the data : Fit three possible statistical cost functions to the data. Use straight- line, quadratic, and cubic formulas and discuss statistical results. Include in your discussion R2, the coefficients, and the statistical significance of the coefficients.

Explain the appropriate discretionary fiscal policy : The economy has seen unemployment rate raise from 6% to 9.5%, the inflation rate decrease from 2.8% to 1.2%, and there has been a 24% decline in consumer spending and a 45% decline in investment spending in the same time period.

Compute the marginal revenue product : Assume the following payoff matrix in which the numbers indicate the profits in millions of dollars for a duopoly based either on a high price or a low price strategy.

Can investment tax credits decrease employment : Many states give companies with an investment tax credit that effectively decrease the value of capital. In theory these credits are designed to stimulate new investment and thus create jobs.

Describe the consequences of government overspending : When watching at our economy, you will determine that government expanding is very important to our overall output of our economy.

Determining efficient level of labour : A medium sized bakery has just opened in Slovakia. A loaf of bread is currently selling for fourteen koruna over and above the cost of intermediate goods

User Account

All Pages