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If total expenditures are greater than potential GDP

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OK, I was told "E" is wrong and "D" is the correct answer;If total expenditures are greater than potential GDP, the proper fiscal policy is to;a) raise taxes or raise government spending;b) lower taxes or lower government spending;c) lower interest rates or raise taxes;d) raise taxes or lower government spending;e) lower interest rates or raise government spending;A paragraph or two for this one;We are in a recession and the government decides to increase its spending in order to start the economy moving towards full-employment. What do you think is the greatest problem with this approach? Do you think that fiscal policy can solve this problem, or do you think that the government should allow the economy to fix itself?

 

Paper#24664 | Written in 18-Jul-2015

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