Once upon a time, in a far away land, King Maudit was spending on new temples and statues. He needed cash and fast. So the King headed down KingPath, stood on his favorite peacock chair, and declared he was selling King Bonds (government bonds). Why should we buy the bonds from you? the crowd shouted. King Maudit pledged, Ill pay good interest! 6%, 7%, ... okay, okay, 12% and the King Bonds are as secure as currency. People lined up to buy K-Bonds. They were better deal than the private bank or the stock market. King Maudit continued to borrow until...

Finale #1 One day the Tatay Group decided to borrow to build a new factory. But the King had borrowed so much, there was little money left. The Tatay Group and other businesses that wanted to expand found themselves bidding against one another for the small amount of savings available for loans. Ill pay 10% shouted one. Ill pay 12%, shouted another. Interest rates escalated. Tatay Group canceled its plan for a new factory. Others did the same. It wasnt long before the Kings economy stagnated.

Finale #2 The king had a bright idea. He would ask his favourite courtier, Das, to print up some money! He was informed that most money was no longer currency but in bank checking deposits. So, he ordered Das to buy all the King Bonds so that he could pay his bills. With all the money earned in government projects, the town went on a buying spree. Shops were bustling and shopkeepers couldnt keep up with orders. It wasnt long before prices in the land went up, up, up. Prices soared and castles were soon out of reach of young citizens. Inflation had come to town.

Finale #3 Prior to the Kings building program, the economy had languished in recession. Unemployment had been above 7% and businesses were discouraged from investing in the new plant and equipment because of the poor business outlook. After the Kings program, employment picked up not only in temple and statues building, but also across the economy because businesses were more optimistic about the future and started to expand their capacity. The town economy boomed!

Finale #4 Banks and wealthy individuals in Chino, a land east of the town, heard of high interest rates and wanted to invest in King Bonds too! So, they eagerly bought a high percentage of the King Bonds. As a result, there were savings in Town for lending to the Towns local corporations, so interest rates fell back to 8%. Years later, investors form Chino started to sell the Bonds and used the proceeds to buy things in the Kings Town. Soon, citizens found that their most desirable goods and services were being exported to Chino, and that the Town real estate and businesses were owned by foreigners.

1. Which ending most closely corresponds to the Indian economy today?

Make an argument supported by reliable literature. [500 words maximum]

#1 Crowding out

#2 Monetizing debt

#3 Keynesian (Crowding in)

#4 Foreign debt