Answer to Question #61786 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%

Make sure you include both the positive and negative effects of your actions, and include the trade-offs or opportunity costs

Discuss the dangers of a high debt to GDP ratio and a growing budget deficit and how this affects your policy recommendations

Answer 1

The goal is to stimulate national economy with cheap money. On the other hand, the government will be forced to cover budget deficit. The instrument of the policy is monetary policy.