What Are The Right Policies To Combat Structural Deficits?
a) It has a high unemployment which stems from an insufficient use of resources.
The issue of unemployment is a big challenge in the world because it affects both the developing, underdeveloped and developed nations. One of the reasons why there is high unemployment is because of the nation’s resources are not comprehensively utilized. To solve the issue of high unemployment level, we offer some policy recommendation. The first strategy is the demand side policies which are aimed at reducing unemployment that results from recession hence decreasing demand –deficient unemployment. The second strategy is the supply side policies that are meant to solve the cases …show more content…
When there is a major imbalance in the federal and state governments expenditure and receipts it leads to a structural deficit. Therefore, this deficit makes a government keep borrowing, and this may lead to large debts. When a country spends more that they can raise there will be a deficit despite the fact that the economy is well or bad. This will make the structural deficit grow at a higher rate as compared to the economy of the country.
What are the right policies to combat structural deficits?
Structural deficits can be combated if the right policies are put in place. One of the policies is for a country to cut down its spending. Cutting spending will be important creating a budget that is manageable. Another policy that can help to reduce the structural deficit is raising more revenues, and this can be achieved by increasing the tax. This will raise more money that can be used in the budget as well as paying the debts.
Why do nations trade based on the concept of comparative advantage?
Nations trade on the idea of comparative advantage so that they may focus on specializing in the production of goods that they can manage to produce commendable using the least resources. Therefore, countries will be able to sell what they are good at producing to another country while they buy the goods that other countries are producing