Pros And Cons Of The Economy Of Bartvia

The purpose of this paper is to advise the president of Bartvia on how to enact some expansionary fiscal policy. The economy of Bartvia is close to a full employment level, meaning that all resources are most fully employed in the economy. A short run tradeoff between unemployment is better than inflation.
To begin with “An expansionary policy is a macroeconomic policy that seeks to expand the money supply to encourage economic growth or combat inflation (price increases’. “Inflation is an increase in the overall level of prices in the economy.pg.14” if unemployment decrease that means more people would have jobs, more employed works means more household spending so the GDP of Bartavia will rise. If people are spending more prices of resources will go up causing an inflation. For example, hiring more employees has its pros and cons. The pros of hiring more employees mean more resources would be made at a quicker pace and if you have more employees that means more growth in the gross domestic production because they will be spending more. The cons would be you’ll have to invest more money to into a training program and the employee’s …show more content…
“A multiplier effect is a shift in the aggregate demand that results when expansionary fiscal policy, increasing income and thereby increase consumer spending”. As the workers earn higher wages the firms also notice higher earnings. The higher demand of spending means higher demand for supplies. For example sense the firms are making more money they need to hire more employees to make more supplies to equal the demand for the product. “The multiplier is an important part concept in macroeconomics because it shows how the economy can amplify the changes of spending Pg410”. Because a change of spending of the household or government spending can cause a big change in the aggregate demand for the country goods and