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| Topic: |
Business
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| Number of pages / Number of words: |
3 / 608 |
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This inverse relation is modeled by Phillips curve.
o Low growth: growth or real GDP rate is based on consumption, investment, government speding and net export. Consumption accounts for the greatest amount, 66%. “people are cutting back on food, limiting travel, looking for second jobs, delaying major purchases and waiting for the cost of a wedding to go down before marryingâ€, which means a lot less consumption and lower GDP...
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More spending means more growth.
o Monetary policy: government or money authority controls money supply to influence the economy. More money supply means more growth.
In order to cure the inflation, ad line needs to move left and as line needs to move right, both indicate lower growth. Therefore, the government can either decrease government spending, only spend selectively , raise taxes or cut down on money supply or do both...
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