Answer to Question #298281 in Macroeconomics for anna

Question

The government of an open economy determines that the current equilibrium level of income in the economy is lower than the fullemployment level of income and wishes to close this gap. The Minister of Economic Affairs hears that you have just studied the Keynesian model of the macroeconomy and approaches you for advice. Which one of the following suggestions would be inappropriate in this context?

A. Create a more favourable environment for investment spending. B. Spend more on infrastructural projects (for example the construction of new roads). C. Encourage households to save a larger proportion of their annual income. D. Reduce the rate of taxation. E. Try to reduce imports by encouraging households and firms to purchase locally manufactured consumer and capital goods.

Answer 1

E.) Try to reduce imports by encouraging households and firms to purchase locally manufactured consumer and capital goods.