As demand of Greatland is outpacing theAs demand of Greatland is outpacing the

As described in this scenario, Greatland’s economic growth is at an all time-high. However, a lot of Greatland’s economic advantages can lead to problems in the near future. Rising inflation and nearly full employment are unsustainable, and will negatively impact Greatland in the future. Greatland’s government needs to issue contractionary fiscal and monetary policies that will decrease the money supply and slow the economy to a sustainable rate. This will have both positive and negative impacts in the short-term, but in the long-term it will be positive overall. These changes have to be managed carefully.  If the government neglects these issues, inflation will spiral out of control, which will damage both the country and its citizens. Greatland’s Fiscal Policy and Monetary Policy has done good for the country, but if these policies remain as they are, there will be inflation in the future. The inflation rate has already went from two percent to five percent. The aggregate demand of Greatland is outpacing the aggregate supply. This is causing a decrease of purchasing power to stir up in Greatland, and will continue growing if it isn’t stopped. The government will need to issue a contractionary fiscal policy and a contractionary monetary policy. The contractionary fiscal policy will reduce government spending, but also increase the tax rates. If the Federal, Local, and State government increase the rates of taxes, the money supply could reduce tremendously. The contractionary monetary policy will reduce the money supply by increasing interest rates, and decreasing bond prices. The currency in GUD is weakening at a fast rate due to inflation. The money borrowing rates for Greatland is only at two to four percent. This rate will go up tremendously if the inflation goes on. By reducing credit, we can reduce the amount of money people spend with their credit cards. These economic adjustments will cause the people of Greatland to save their money. If we increase the interest rates too fast, the stock market will have less money. Which can cause multiple places to go out of business. If the economy slows down too fast, the stock market could crash.Our contractionary policy will cause businesses to lose growth and production, as well as innovation. Though, negative externalities like pollution will be reduced. That said, positive externalities could be negatively impacted. Decreasing government spending will have both a positive and negative impact on Greatland. Strengthening Greatland’s National Defense, helping and building schools and hospitals, welfare, social security, and TANF will lose power. This contractionary fiscal policy will reduce government spending, but this will also reduce the amount of money given to support programs. Even though the unemployment rate is only 4.2 percent right now, the unemployment rate will increase.As the supply of labor goes up, wages will go down. This will cause the demand for TANF to increase. Targeting spending to programs like TANF, even though government spending is reduced, will help the unemployed. The reason why Greatland’s national debt has been trimmed by one trillion dollars is due to the rising inflation. The higher the inflation, the less the government has to pay in debt. The benefits of decreasing government spending are both the reduction of the national debt and inflation in the future. As the Gross Domestic Product of Greatland rises, the inflation of Greatland rises too. If the GDP continues to increase at an uncontrollable rate, it will cause a negative impact on Greatland in the long-term. We need to make sure the government carries out these contractionary fiscal and monetary policies when they meet up for the fifth time. This will cause Greatland to reduce their inflation in the future. Even though it may create problems in the short-term, Greatland’s economy will continue to prosper in the future.