* Can there be a discussion about Central banks in relations to interest rates,

Question

* Can there be a discussion about Central banks in relations to interest rates, Contractionary vs. expansioinary, balance of payments?

If not, I am more than willing to read someone's opinion on this question with their own ideas and opinions.

Thank you very much!

16. Extra credit essay. (5 points) Imagine a friend of yours was running for Congress, and asked for your help figuring out to say about macroeconomic policy. In two or three paragraphs, explain what issues you would tell your friend to talk about, and what policies you would suggest supporting? For full credit, you must make use of concepts from the class, but you can also draw on your general knowledge about the economy and politics.

Explanation / Answer

In my opinion Fiscal policy related issue should be discussed about. Fed Reserve works autonomously.

Fiscal contraction:

After financial crisis and recession, government increased its expenditure through bailout packages and other medium. Budget deficit increased substantially during this period. Government still continues to spend more even after recession is over.

Unemployment rate has reduced to 4.2 % which is near the natural rate of unemployment. Inflation is likely to rise if government continues to spend at same rate.

Thus, now government must reduce the spending and thereby inflation and deficit would also come down.

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