Question

The nation is experiencing the following:​

a. It has a high unemployment which stems from an insufficient use of resources.

       b. It faces a current account deficit.

c. It has a capital account surplus.

d. The technology level is low

      

e. The infrastructure level is low.

What policy recommendations would we offer to cure the aforementioned maladies?

Note, these policy recommendations should be complementary to one another, or if there is some contradiction, we should advise a sufficient number to address all of them.

Answer 1

1) It has high unemployment which stems from the inefficient use of the resource.

Policy recommendations: If the resources are government owned then allow private organizations to operate it and provide them a free market. Such inefficiency occurs in countries where the government is operating everything and the role of private sector is limited. If it is already private sector then the government should step in increase expenditure and provide an efficient and full utilization of goods. Change the management.

2) It faces a current account deficit: Allow the currency to depreciate it will make the imports costlier and exports cheaper. And put excise duties on the unnecessary imports. It will fill the gap easily.

3) Capital account surplus: Assuming the country has a managed float like most of the nation in the world. Then the country should increase its foreign reserve and manage the exchange rate at a stable position to promote its export and imports of goods. Example India and Japan always adopt this policy.

4) Technology level is low: Promote the people to do more research by giving them tax breaks. The government should themselves invest heavily in education and research and development in the nation.

5) Infrastructure level is low: Invest in infrastructure there is no other option we can manage this. Encourage public-private partnership, foreign direct investment etc to increase investment in the infrastructure.