Answer to Question #254208 in Macroeconomics for Hansi

Question

An economic advisor to the government recommended for liberalizing the capital account before adopting expansionary macroeconomic policies so that there might be a different policy outcome. Evaluate the validity of this policy recommendation.

Answer 1

Liberalization, the loosens the government controls on international trade and capital. This will help the expansionary policies to stimulate an economy by boosting demand through monetary and fiscal stimulus.