Apon Loho

Bangladesh is among one of the five fastest-growing economies of the world - despite insufficient private sector investment - with a 7.3% GDP growth projection in the FY2019. The World Bank announced this ranking in its report titled "The Bangladesh Development Update April 2019: Towards Regulatory Predictability". To sustain this progress, the country needs continuity in priority reform areas: financial sector, fiscal, infrastructure, human capital and business regulation. Consequently, in the upcoming national budget, the government is heavily focusing upon these priority reform areas.

Respond to the following questions based on the above scenario.

(a) If the government spends on the human capital and on training & development of the labour force, how do you think this will affect the wage rate, labour hours, and the real GDP of the economy? Illustrate your answer with an appropriate diagram.

(b) The report from the World Bank also stressed about the insufficiency of private sector investment inside the economy. What type of policy would you recommend the government should take here and how will this impact the price level and the real GDP of the country? Explain your answer using the AD-AS model.

(c) Additionally, if the Government wants to inject liquid money in the economy to stimulate investment further through expansionary monetary policy, what specific type of policy should it follow?