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Question: Please detail the possibilities of using fiscal policy to stimulate economic activity in Denmark in a situation of economic stagnation among the most important trading partners. What facts...

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Question:

Please detail the possibilities of using fiscal policy to stimulate economic activity in Denmark in a situation of economic stagnation among the most important trading partners. What facts indicate respectively against expanding fiscal policy in the current economic situation?.. I will upload a document needed for answering of this question

Answered Same Day Dec 23, 2021

Solution

Robert answered on Dec 23 2021
129 Votes
As government spending increases, aggregate demand increases. As a result, aggregate demand
exceeds aggregate supply which leads to an expansion of GNP. But as GNP rises, real money
demand also increases. This causes interest rates to increase to restore the money market
equili
ium. With higher interest rates, the rate of return on...
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