Consider the following data for Country A and Country B.Country A2.2%80%5%Primary BudgetSurplus/GDPSovereign Debt/GDPNominal GDP GrowthRateCountry B2.5%90%2%Nominal Interest Rateon DebtIn this scenario Country Ais likely to see fiscal stabilization.How will monetary policy likely change in the country that will not see stabilization?7%4%O The central bank will decrease interest rates.No new government debt will be issued.The central bank will keep interest rates stable, but increase the money supply.O Congress will decrease spending.

Fiscal stabilization refers to actions taken by a government to ensure its finances are in a stable…

Consider the following data for Country A and Country B. Country A 2.2% 80% 5% Primary Budget Surplus/GDP Sovereign Debt/GDP Nominal GDP Growth Rate Nominal Interest Rate on Debt In this scenario Country A 7% Country B 2.5% 90% 2% 4% is likely to see fiscal stabilization.

Consider the following data for Country A and Country B. Country A 2.2% 80% 5% Primary Budget Surplus/GDP Sovereign Debt/GDP Nominal GDP Growth Rate Nominal Interest Rate on Debt In this scenario Country A 7% Country B 2.5% 90% 2% 4% is likely to see fiscal stabilization.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the following data for Country A and Country B.
Country A
2.2%
80%
5%
Primary Budget
Surplus/GDP
Sovereign Debt/GDP
Nominal GDP Growth
Rate
Country B
2.5%
90%
2%
Nominal Interest Rate
on Debt
In this scenario Country A
is likely to see fiscal stabilization.
How will monetary policy likely change in the country that will not see stabilization?
7%
4%
O The central bank will decrease interest rates.
No new government debt will be issued.
The central bank will keep interest rates stable, but increase the money supply.
O Congress will decrease spending.

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