Question 1 The Danish Ministry of Finance’s Economic Report from
May 2022 shows that things are...
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Economics
Question 1 The Danish Ministry of Finance’s Economic Report from
May 2022 shows that things are going well in Denmark, with strong
public finances and the lowest unemployment rate in 13 years. The
Ministry writes: “Although we should expect a slowdown in the
Danish economy during the year, the level of activity will remain
high. Given the outlook for continued high activity, it is
appropriate to tighten fiscal policy in 2022. We are not in a
situation where there is a broad need to support and stimulate
demand.” At the same time, the U.S. central bank has chosen to
implement a tighter monetary policy than the European Central Bank
(ECB). The U.S. Federal Reserve has already raised interest rates
and announced further increases in the near future. Analyze the
short-term effects of a contractionary fiscal policy in Denmark,
and then analyze whether the change in U.S. monetary policy will
impact the Danish economy.
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