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Recommend policies to lower the inflation and unemployement, and to increase the GDP

Economics Dec 14, 2020

Recommend policies to lower the inflation and unemployement, and to increase the GDP.

Expert Solution

The inflation rate in all developed nations has been extremely low for a few decades now and some have even struggled in fighting against deflationary bouts (i.e., Japan despite having the highest debt-to-GDP ratio of any country at 235%). Therefore, for these countries the most pressing issue is unemployment and low growth (secular stagnation). Even for those who are employed, many are burdened with low quality jobs in the gig economy, which translates to little to no benefits and security. With these developed economies clearly operating below potential GDP, a federally-funded job guarantee program could be implemented to act as a counter-cyclical automatic stabilizer for when there is significant slack in the private-sector labour market. A preventative measure to combat potential inflationary effects from such a program would be to increase taxes on the upper echelons of the income bracket. This would also act as a way to mitigate recent upsurges in income inequality.

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