After you have studied Economics in the News on pp. 720 – 721 , answer the following questions.
a. What was the state of the Japanese economy in 2013?
b. Explain the effects of Japan’s high level of government spending and debt on the level of employment and potential GDP.
c. Explain how inflation and faster growth might lower Japan’s government debt ratio, and why neither is an attractive option.
d. Explain how monetary policy might be used to offset a decrease in aggregate demand that a contractionary fiscal policy induced and draw a graph to illustrate your answer.