Evaluation Flashcards
1
Q
Increase in- I/X
A
Good for the economy in both the short and the longer term
- Shifts AD
- Moves out LRAS
Importance of rebalancing the economy.
2
Q
Increase in component of AD- C/G
A
Good in the Short term as to boost AD out of a negative output gap, however in the longer term as the economy approaches full employment the multiplier effect will no longer boost growth but start to generate demand pull inflation. However even through the UK is currently at or approaching Fe, I believe we still need this because we have low inflation of 0.3%.
