The economy experiences a serious decline in consumer and investor spending while the objective of government?
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The economy experiences a serious decline in consumer and investor spending while the objective of government is PRICE stability.
What would be your fiscal policy recommendations to the government (using spending and taxation) in the scenario?
Price stability means you should use government spending or taxes to offset any changes in consumer and investor spending. So you could reduce taxes or increase spending or some combination of both to offset the change in spending and investing by consumers.
Basically balance:
Gov + Consumer + Investment = Total Spending
They’ll be factors changing it such as money multipliers but for business economics your teacher shouldn’t care. If he does, remind him you’re a business major.