Question

Country Q has experienced a rapid increase in its unemployment rate and a sharp decline in its GDP. What might policymakers do in the face of these economic indicators?

Answer 1

In order to revert the negative trend of both of these indicators, the Federal Reserve may decide to:

• Increase government spending in public projects such as the development of infrastructure, which normally create thousands of direct and related jobs.

• Lower the federal interest rate in order to make it more attractive for Banks to take loans and make investments that will help the industry and eventually, society.

Answer 2

The policy makers need to decrease the interest rates. This will increase the buying power of the people and that in turn will increase the market demand. This way the GDP of the country will also start improving. As the market demand increases, employment rate will also start improving. I hope the answer helps you.