Reference no: EM131095923

Hemesia, a developed economy, has been experiencing low growth in output with a high rate of unemployment for more than a year. Two members of the National Trade Union in Hermesia to stimulate economic growth in Hermesia, Geoffrey Miller and Arthur Davis, are discussing the relevant expansionary policies that can be taken by the central bank or the government to stimulate economic growth in Hermesia. Geoffrey suggests that the central bank should substantially lower the reserve requirements of the commercial banks so that money supply and household spending both increase. Arthur, however, disagrees. According to him, a decrease in the reserve requirements will not have the desired impact on money supply. He believes that an increase in government spending is more likely to boost the economy that an expansionary monetary policy. Which of the following,if true, would stenghten the case for an expansionary monetary policy, as opposed to an expansionary fiscal policy, in hermesia? A. Hermesia attracts very low levels of foreign investment due to relatively low interest rate s and the lack of attractive investment opportunities. B. Interest rates on government bonds in Hermesia skyrocketed following a downgrade of sovereign credit ratings. C. The level of non-performing assets of the banking sector increased during last year. D.Currency in circulation accounts for around 23% of the total money supply in Hemesia. E. the taxable income base in hemesia is very large compare to that in other similar countries.