Hollande and Draghi

Reuters: Hollande, Draghi agree on threat of deflation: official

Article published: Sep 1, 2014 – out of date: no longer suitable for your IB Economics commentary

IB Economics syllabus: Section 2, Macroeconomics

As deflation is threatening Europe, Mario Draghi, the president of the European Central Bank (ECB) calls for expansionary fiscal policy over contractionary measures, having had a discussion the French president. The problem is that France’s budget deficits have recently been very high, so there is a trade-off here: further increases in the form of a fiscal stimulus would add to the already large deficits – something France does not want. An interesting article, where you can make use of the AD/AS diagram.

Source of photograph: Reuters/Philippe Wojazer

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