Describe role played by expansion in the government sector

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1. Describe the role played by expansion in the government sector (funded by budget deficit and public borrowing) in changing prevailing levels of unemployment and GDP. Your exposition should be based on sound economic principles and should have appropriate graphs (like aggregate demand and aggregate supply).

2. Describe how sustained budget deficits can lead to interest rate increases and how that might lead to crowding out effect. Do you think that an expansion in the government sector (funded by budget deficit and public borrowing) is good for the savers? Carefully elaborate your argument and provide appropriate graphs wherever you can.

3. Describe how an increase in the interest rate may affect the savers, firms, employment numbers and GDP. Given the current scenario, would you advocate a hike in the interest rate by the Fed? Carefully articulate your argument and assume that you are advising the Chairperson of Federal Reserve. Be very careful as your advice may have significant impact on the US economy.

Reference no: EM13738569

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