Question

An earthquake in Japan destroys an automobile factory. In response, the United States exports more automobiles at a time when the American economy is at full employment. What could the U.S Government do in order to reduce inflationary pressures on the U.S economy

Answer 1

Government could adopt the unorthodox fiscal and monetary policies in order to reduce the inflationary pressures on the U.S.

What changes could be made by adopting the unorthodox fiscal and monetary policies?

Fiscal policy could bring the change in the spending of the government and taxation as well.

Monetary policy also impact the supply of the money in an economy, in the condition of the increased employment.

These two policy could be adopted by the government, as it influence the employment and household income.

Learn more about the fiscal and monetary policy here:-

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