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    "Monetary policy remains quite accommodative, with short-term real interest rates still close to zero. In addition, fiscal policy will likely continue to provide considerable impetus to domestic spending through the end of this year."

    What does he mean by the above statement and what indicators would he use to illustrate his position. Explain both the monetary and fiscal indicators.

    "Despite a dramatic increase in cash flow, business fixed and inventory investment, taken together, have risen only moderately. Indeed, internal corporate funds exceeded investment over the course of last year for the first time since 1975."

    When he talks about business fixed and inventory investment, what part of the national income model is he referencing and what indicators would you use to illustrate that statement.

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    https://brainmass.com/economics/monetary-policy/business-investment-government-economic-policy-18152

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    Hello,

    He means that economic policy is obviously trying to stoke an economic recovery. With interest rates (indicator: Federal funds rate) close to zero, corporate and consumer borrowers can borrow at very low interest rates, thus encouraging corporate investment and consumer big-ticket purchasing. With the government spending (indicator: Federal budget) with record breaking deficits, this would encourage economic expansion as the government purchases more goods and services, while hiring more.

    He is referring to the corporate investment part of the national income model (indicator). Companies are investing very little to produce higher inventories (in anticipation of higher sales) and very little in fixed assets like new production capacity (new factories and machinery) to prepare supply a higher consumer demand.

    What profits companies are making, they are returning to shareholders as dividends rather using profits to expand the business. All of these indicators are measured and tracked monthly by organizations like the Institute of Supply Management (ISM).

    Hope this helps!

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 4:57 pm ad1c9bdddf>
    https://brainmass.com/economics/monetary-policy/business-investment-government-economic-policy-18152

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