Answer to Question #283616 in Macroeconomics for Aqlama

Question

12. In the current Pakistan's scenario what fiscal policy do you suggest to achieve high economic growth

with price stability? Justify your answer.

Answer 1

According to The World Bank, the economy of Pakistan experienced a negative annual GDP growth rate in 2020, that is, -0.94%. Since this economy experienced negative growth, an expansionary fiscal policy is needed to help the economy recover. The expansionary fiscal policy can include an increase in government expenditure, a cut in taxes, or a combination of both. The expansionary fiscal policy will boost consumption, investment, and exports and thus lead to an increase in aggregate demand and economic growth.