- Prime Minister asks for a plan to increase government spending to offset the fall in investment. The Finance Minister recommends three alternative choices to finance the plan:

(i) An equal increase in taxes to fund expenditures.

(ii) Borrow the money by issuing new government bonds and maintain tax revenues invariable

(iii) Finance the expenditures by printing of money and maintain tax revenues invariable.

Order these financing alternatives from most expansionary to least expansionary. Also explain your ranking.

b) - The Conservative Party of United Kingdom always criticize the crowding-out effects of the government borrowings on private investment. The candidate for Prime Minister from Conservative Party argues that the UK government should just print money to manage the budget deficit. Discuss the merits and demerits of this scheme?