Answer to Question #65895 in Macroeconomics for Josh

Question

In order to stimulate the National Economy, how should the government affect each of the main Variables in the National Income Model. Y= C+G+I+(X-M)?

Answer 1

- For stimulating consumption (C) the government should cut the income taxes.
- Government can rise its spending (G) by financing, for instance, infrastructure constructing programs,
- Investment (I) stimulation is one of the most difficult one. Government should provide appropriate level of business climate, the rule of law in the country for guarding private investments. Government can also run the policy aiming to decline the rates level. For example programs like cheap loans for small and middle size business.
- Government can encourage exporters (X) to deliver more goods and services abroad by means of taxes. For example the government can take away taxes on firms exporting goods abroad for short period of time!