Answer to Question #49754 in Macroeconomics for Nana

Question #49754
IMF sees UAE GDP growth slowing to 2.3 pct in 2012. 1. Summarize this with your own words. 2. Which stage in the business cycle do you think the economy is in? 3. Give two reasons to defend your chosen business cycle. 4. Identify the right fiscal policy that should be followed: contractionary or expansionary. 5. Explain why this fiscal policy should be used. 6. Explain how this fiscal policy would impact the economy. 7. Analyze how the information provided in the article will impact the macroeconomic indicators. You should use two indicators: output and unemployment in your analysis. Many Thanks !
Expert's answer
1. This means, that the economy of UAE is slowing down, so the government needs to implement some policy to push the economy increase the growth rate.
2. The economy is in the stage of recession.
3. If the economy is slowing down and GDP growth rates decrease, there is a recession.
4. In this case expansionary fiscal policy should be followed.
5. Expansionary fiscal policy should be followed to push the economy through the decrease of interest rate or increase in government spending.
6. A decrease of interest rate or increase in government spending would impact the economy increasing the business activity.
7. In this case output will rise and unemployment will decrease.

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