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India’s Economy Before Expansionary Monetary Policy (Other (Not Listed) Sample)


This sample was an IB Internal assessment about macroeconomics. The topic was India Govt committed to make sure capital expenditure continues to support growth momentum. This task had problem and solution graphs. The sample talked about expansionary policies that the government used to support growth momentum and reduce inflation in India.


India’s Economy Before Expansionary Monetary Policy

Article Link: - need problem graph - solution graph - talk about fiscal policies
India’s Expansionary Fiscal Policy
The article is about the Indian government’s interventions to make sure capital expenditure supports the nation’s growth momentum. According to this article, India implemented various interventions, like lowering taxes to support the economy. This commentary evaluates the Indian government’s expansionary fiscal policy, such as reducing taxes to sustain the economic growth momentum.
The government’s purpose entails improving the economy by lowering taxes, launching an asset monetization drive, privatization, and establishing organizations for impounding bad mortgages and handling them (PTI). These expansionary fiscal policies will help India cope with domestic inflation and strengthen the country’s real economy. The current inflation is at 7%; thus, the government aims to decrease it to around 4% (PTI). According to this article, the present global difficulty after the third Covid-19 wave is that investors are running away from developing markets, additional uncertain assets, and frontier economies (PTI). Thus, nations like India tend to be at intensified peril. The diagram below shows the current state of India.
1980565279400Current Indian Economy020000Current Indian Economy781050269875
32861252645410Inflationary Gap00Inflationary Gap24193502795905809625395605-635338455Expenditures020000Expenditures49434753472180Production020000Production268605019672301428750176530Full Employment00Full Employment44958001167130AE00AE4305300443230Y= AE00Y= AE
Figure 1: India’s economy before expansionary monetary policy
Vital research might be drawn from the Keynesian model. There is an elaborate association between full employment and equilibrium. For example, when India is operating at total capacity, the equilibrium aggregate is unaligned with the level of cumulative production at this stage. This phenomenon creates an inflationary gap. The space between AE and Y = AE and full employment demonstrates an inflationary gap. The situation originates from an expansion in the business cycle.
An excellent method to eliminate the inflationary gap and strengthen India’s economy is through expansionary fiscal policy, including reducing taxes. By lowering taxes, the Indian government will raise consumers’ spending power and increase aggregate demand. This situation will result in improved economic growth. The phenomenon will also lead to reduced inflation.

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