What are the two policy options used to influence the economy?
In the current economy, we observe the following.
Inflation rate 9.20
Interest rate 10.60
Growth in Real GDP -0.51
Unemployment Rate 6.80
The two policy options are monetary policy and fiscal policy.
The economy is in a recession, with a negative growth rate and a high unemployment rate. The inflation rate is also high, although not at a hyperinflationary level.
a) Monetary policy attempts to influence the economy by changing the money supply. In this economy, the central bank will note that ...
Given data for an economy's inflation rate, interest rate, GDP and unemployment rate, this solution shows how to determine the appropriate monetary policy and fiscal policy, and their possible negative consequences.