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Describe the possibility of success by carrying out the alternative suggestion regarding lowering the Danish interest rate level

Based on a prognosis regarding the continuing increase in the Danish level of unemployment in 2003 - 2004, the government considers the use of an expansionary policy.

Some claims that an expansionary fiscal policy in the form of either:

A increase in government spending for the year 2004 - 2005 or
A temporary tax cut (the tax is reduced by 1 % in 2004 and 2005).

The main argument is that these actions will increase aggregate demand in Denmark right away. Others claim that a more appropriate action would be to lower the interest rate to stimulate private investments.

By using the relevant models and based on the fact that Denmark has a fixed exchange rate regime, the following problems are to be answered:

Account for the possibility of success by carrying out the alternative suggestion regarding lowering the Danish interest rate level.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M921495

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