The government, not willing to wait on the economy to correct itself, also tracks economic data in an attempt to develop policy to smooth out fluctuations in the business cycle. Taking note of your economic expertise, the government has retained you to develop a policy that combines monetary and fiscal policy to eliminate the gap identified in the previous project. Assuming the gap identified has a value of $200 million and MPC = .75; MPS = 0.25 and the required reserve ratio = 0.10. You should write a two-page report that includes the following: Discuss how you plan to eliminate the gap using monetary and fiscal policy, including values for changes to the money supply, taxes and spending necessary to eliminate the gap. Discuss the pros and cons of policy you developed. From your viewpoint as an economic consultant, should the government engage in such policies or let the free market correct itself. Why or why not. Finally, make a recommendation to the government to intervene in the economy, following the plan you developed, or to stay out economic business. Defend your position using economic concepts covered this semester

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As an economic consultant I will outline a policy that combines monetary and fiscal measures to eliminate the identified gap of 200 million in the economy To achieve this I will propose a plan that in... View the full answer