The increase in living standards of Lisavia can be achieved through various economic policies. The monetary policy will be used in boosting aggregate demand. The Lisavia Government will cut the rates of interest, minimize the cost of borrowing, supporting investment, and spending by citizens. It will lower the incentive to save, and the citizens will invest their money in various projects which will be used in economic growth (Howitt, 2019). The low interest rates will also minimize the interest payments on the mortgage, allowing the Lisavia citizens to purchase their homes, thus increasing their living standards. The disposable income will also rise, making it possible for citizens to afford what they need.
Fiscal policy will be used to boost the demand for goods at Lisavia by cutting taxes and increasing government spending. When the income tax is low, the disposable income will be more. It will be possible for citizens in the nation to purchase what they need and pay for services such as high-quality education and medical services, which increases their living standards (Eichenbaum, 2019). When the Lisavia government is spending, it will invest in projects that will result in job creation and stimulate economic growth. Levels of unemployment will thus decrease; in turn, the living standards will go high.
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The president should also consider devaluation policy. The process will help increase competitiveness in the international market and boost domestic demand. When the exchange rate is low, Lisavia will export its goods at a lower price, and imports will be expensive. The taxes on imports will then be pumped in government projects on economic growth (Okana & Eguchi, 2019). The citizens will also be encouraged to produce on a large scale since exporting their products will result in massive profits. The three economic policies will boost the economy of Lisavia and enhance the living standards of the people.
References
Eichenbaum, M. S. (2019). Rethinking Fiscal Policy In An Era Of Low Interest Rates. http://faculty.wcas.northwestern.edu/~yona/research/MAS.pdf
Howitt, P. (2019). The implications of knowledge-based growth for micro-economic policies . Routledge.
Okana, E., & Eguchi, M. (2019). Optimal monetary and fiscal policy rules, welfare gains, and exogenous shocks in an economy with default risk. Working Paper. Birkbeck, University of London, London, UK.
