Fri 3 Jun, 2016 09:49 am
I have encountered the following question during my homework and I am a bit lost, hopefully someone could point me to the answer.
A closed economy is in equilibrium unemployment. After social protests, the government decided to increase public consumption at A$ funded by a loan from the public. Let disinflationary gap exists for economy at size A$.
For each of the following economists, mark if the statement is true or false, and why.
Economist A: The government's policy will lead the economy to full employment
Economist B:. If the Bank of America will also (in addition to the government's policy) a monetary expansion, then it is possible that interest rates will decrease.
Economist C: If the central bank will keep interest rates constant, then the change in private savings will be larger than the change in public saving.
Economist D: If the government will fund the additional taxes expenditure instead of a loan from the public, and it is known that the money demand does not depend on the product, then the consumer spending in the economy will decrease