Why might stimulus come too late? What are
the potential consequences of stimulus coming
too late?
After you have studied Economics in the News on
pp. 720 – 721 , answer the following questions.
a. What was the state of the Japanese economy
in 2013?
b. Explain the effects of Japan’s high level of
government spending and debt on the level of
employment and potential GDP.
c. Explain how inflation and faster growth might
lower Japan’s government debt ratio, and why
neither is an attractive option.
d. Explain how monetary policy might be used
to offset a decrease in aggregate demand that a
contractionary fiscal policy induced and draw
a graph to illustrate your answer.