Final answer:
To advise President Biden on macroeconomic policy, one should suggest measures based on the economic context, such as employing expansionary or contractionary fiscal policies, and consider altering school incentives and promoting research and development. Ricardian equivalence impacts the national saving and investment identity when deficits change.
Step-by-step explanation:
When advising President Joseph Robinette Biden on macroeconomic policy, one must consider the current economic conditions such as inflation and unemployment. For instance, in a Keynesian framework, to combat recession, government policy could include expansionary fiscal policy: reducing taxes or increasing spending in areas like healthcare or military to stimulate economic activity. However, during times of economic upswing, it may be prudent to implement contractionary policies like tax increases and spending limits to avoid overheating the economy.
To encourage an emphasis on altering school incentives, one could suggest implementing performance-based funding, creating competition with charter schools, and providing tuition vouchers, which can shift the focus towards improving educational outcomes rather than solely increasing budgets. Meanwhile, steps to encourage research and development could include tax credits, direct subsidies, or forming public-private partnerships.
The implications of Ricardian equivalence in an economy's national saving and investment identity need to be addressed with care. If the budget deficit rises, private saving adjustments or increased foreign investment are necessary to maintain investment level if the economy adheres to Ricardian equivalence.