just 2 questions, thanks! Which of the following policies should a country imple
ID: 1102773 • Letter: J
Question
just 2 questions, thanks!
Which of the following policies should a country implement in an economic downturn to avoid a Paradox of Thrift?
a) Implement policies to encourage saving.
b) Implement policies to encourage greater consumption.
c) Raise taxes to ensure the government stays funded.
d) Reduce overall government spending.
If an economy’s investment outlook improves, leading to increased borrowing to finance new building projects, what is likely to happen to interest rates?
a ) Interest rates become 0%.
b) Interest rates fall.
c) Interest rates rise.
d) Interest rates stay the same.
Explanation / Answer
a) (B) Implement policies to encourage greater consumption.
reason to avoid problem of paradox of thrift economy should encourage the consumption so that production, Income and employment continuously work together to come out of the problem of paradox of thrift.
b(B) Interest rates fall.
reason if more investment is taking place it would lead to fall in the interest rate and create an environment of more investment in the economy as marginal efficiency investment wll rise and economy growoth increases.
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