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8 July, 03:04

Country X's economy is in recession. Which of the following combinations of fiscal and monetary policy actions would move the economy toward full employment in the short run?

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  1. 8 July, 04:49
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    Country X can puruse cheap monetary policy with deficit fiscal policy to generate full employment in short run.

    Explanation:

    Recession can be understood as a period of extended reduced demand accompanied by the retrenchment of the workforce as a cost-cutting measure. Recession can be handled by an adequate mix of monetary and fiscal policy measure-

    Monetary measure - Cheap monetary measure must be pursued by the Country X. This includes low repo rate, cheap loans to employment generating avenues, business establishments etc.

    Fiscal policy - Government of the country X should indulge in deficit financing, borrowing from international institutions, providing tax breaks, tax credits to let the firms run in full swing and generate employment.
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