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B.) There is a balance of payments surplus within the country, this implies that the country's exports are higher than its imports and hence there is a net flow of money into the country. Which could cause an inflationary gap within the economy. Thus the economic crisis is recession
C.) Fiscal Policy is the term which describes the behaviour of governments in raising money to fund current spending and investment for collective social purposes for which the government is responsible.
Monetary or Financial policy is the process of managing a nation's to achieve specific goals—such as constraining , or achieving full .
ii.) Fiscal policy can include to stimulate demand for domestic goods and services to rise (e.g. to fight ) and vice versa, it can include surplus spending to raise the budget surplus to fight inflation.
Monetary policy can involve setting , or acting as the through negotiated agreements with other governments. Any monetary action can be classified as either contractionary or expansionary. actions seek to reduce the size of the . actions seek to increase the size of the money supply.
d.) Extra spending on public works can increase GDP because it would create more jobs for the unemployed and by building schools in particular it is a long term investment, in the sense that the educated members of societ will have something greater to contribute later in life due to the education they have received not only that but those schools also create jobs as well. Thus by doing so, the government would set off a chain reaction, which is potentially beneficial for the country’s economy. By adopting this action, the government would be offsetting an expansionary fiscal policy, a policy that involves increasing and cutting , in order to spur economic output. The multiplier effect would also take place because du to the government increasing its expenditure on building schools, without a corresponding increase in taxation. This sum would go to the builders, who would hire more workers and distribute the money as wages and profits. The households receiving these incomes will save part of the money and spend the rest on consumer goods. These expenditures in turn will generate more jobs, wages, and profits, and so on with the income and spending circulating around the economy. This would have a drastic effect on GDP, because it should in practice raise GDP quite significantly.
e.) The balance of payments is a measure of the payments that flow from one to another. It is determined by a country's and of goods, and services. A balance of payments surplus occurs when the government is consuming all that it produces as an economy and as a result of that, requires to import more. A government might wish to reduce a balance of payments surplus inorder to prevent inflation. An unwanted balance of payments surplus can be the result of excessive foreign investment in the country. This will place a future strain on the invisible balance. A reduction in interest rates or restrictive exchange controls will correct the surplus.
