Governments use the tools they have to boost the economy. When the economy slows and unemployment rises,
Question:
Governments use the tools they have to boost the economy. When the economy slows and unemployment rises, governments will generally spend more. Low interest rates encourages spending – that can boost the economy. A side effect, which isn’t always good, is that low borrowing rates can cause housing prices in an area to increase. At times, that can create artificially high housing prices, or what is called a housing bubble. Bank of Canada has lately increased interest rates to slow down the housing market in Canada that may also bring some recession in overall economy. What are your thoughts on the steps taken by Govt (raising interest rates). Is it a wise decision taken by the Bank of Canada or not?
List & explain at least 3 points supporting your argument.
Macroeconomics Principles, Applications, and Tools
ISBN: 978-0132555234
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez