The economic outlook of Nonsensestein Republic is not looking good. During the e

Question

The economic outlook of Nonsensestein Republic is not looking good. During the electioneering campaigns, the newly elected Prime Minister, Dr. No-nonsense promised to improve the economy. Her new executive government is proposing two policies: either increase government spending or decrease taxes. On the other hand, Central Bank of Nonsensestein Republic Governor, Prof. Know-it-all, is proposing two policy alternatives: encourage savings or stimulate private investment. The Prime Minister was informed about ECON 100 at the University of Badu, because of this; she employs you as her Chief Economic Adviser. Congratulations! Your first assignment is to recommend an economic recovery policy from the policy alternatives. - Use the appropriate multiplier formula to determine the impact of the following on Nonsensestein Republic

Explanation / Answer

As a economic adviser,I will adviceb) an increase in investment by $550 million (MPC = 0.65)

because if investment is done ultimately economy of countryu will inprove as they are inter related.!!!

And policy combination will be:

) b) an increase in investment by $550 million (MPC = 0.65) withd) an increase in household spending by $700 million (MPC = 0.7)

As more the savings more will be the improvement in economy.!!!

Monetary policies isb) an increase in investment by $550 million (MPC = 0.65) as it improve economic growth and increase stability.!!

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