Answer to Question #61785 in Macroeconomics for Jessica

Question

Assume that a country has a growing budget deficit, carries a very large debt, is in a period of high unemployment with interest rates almost at zero, and annual inflation and GDP growth of about 2%.

What is the first action you would take as the president? Why?

Answer 1

Since inflation is about zero, it sounds reasonable to decline the interest rates in the country in order to stimulate private spending and growth of a national economy. Commercial banks will lend money from a central bank, and then borrow it to businesses. It is going to be the main precondition of the economic growth.