ScholarMatic: Explanation & Answer
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You are the recently elected president of the Gamma country, a developing country that is still producing way below the full capacity. This country is leaving a recession period, so you need to push economy growth. Luckily, most of the congressmen support you, besides this country has low to zero corruption, and there are some reserves you can use for implementing economic policies, what would you do if you need to maximize the impact of your policy and do not want interest rates to fall below its current level (the economy is close to a liquidity trap)?
A.increase government spending in infrastructure projects (roads, bridges, railway), that are a necessary supporting the markets development.
B.apply tax cuts to big corporations, private sector needs to be liberated from government burden to create jobs, and reduce government spending in infrastructure
C.order to the FED to sell government securities and bonds in open market operations, you need to increase some funds form the people to apply expansionary fiscal policies.
D.increase government transfers to the poor, they already suffer a lot due to the recession.
ScholarMatic: Explanation & Answer
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