The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now stock market prices begin significant increases, causing peoples’ investments, such as their retirement accounts and other investments, to increase in value. People feel very good about the future and use their new-found wealth to buy things that they had been hesitant to purchase in the past. Include detailed answers to the following questions: 1. What would be the likely impact on the government budget and national debt of the use of these fiscal policy tools (taxes, government expenditure, transfer payments, and interest rates)? 2. How would the use of these fiscal policy tools stabilize the economy?
The economy of a hypothetical country has been stable for two or three years with very low
1. What would be the likely impact on the government budget and national debt of the use of these fiscal policy tools (taxes, government expenditure, transfer payments, and interest rates)?
2. How would the use of these fiscal policy tools stabilize the economy?
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