2. “The 2013 budget … included job-creation initiatives for infrastructure, job-

Question

2. “The 2013 budget … included job-creation initiatives for infrastructure, job-training and innovation”. To offset the cost, it “called for raising $1.5 trillion over 10 years from the wealthiest taxpayers and from closing some corporate tax breaks, chiefly for oil and gas companies.” 6 3. “The House … laid down a bold but risky election-year marker… unveiling a budget proposal that aims to tame the national debt by reshaping Medicare and cutting deeply into Medicaid, food stamps and other programs for the poor, while reshuffling the tax code to sharply lower rates” 7 4. “Mr. Bernanke has often defended Fed actions against domestic critics, who argue the policy of keeping interest rates near zero while ramping up asset purchases hurts savers and risks future inflation.” 5. “Even if the tax increases hit in January, families might not notice the incremental loss of income in the near term, economists said. Households might temporarily dig into savings to maintain their spending on the gas, food, housing and other consumer goods, mitigating the

Explanation / Answer

2) Budget helped in creating job opportunities which mean a rise in gdp growth rate and inflation in the economy . To offset this if the wealthy wil pay more tax government will raise revenue to finance these costings . High prices may affect the economy in return because slowly the after tax income will drop ,people start saving moree which can affect gdp growth rate eventually thus it can have a cascading effect.Thus fiscal policy measure.

3)Any cut in healthcare like mediaid and food stamp reduction is a way to reduce government spending but for those counting on such aid will be difficult to manage . This highlights major changes in the tax reforms , when the expenses are cut it is followed by a tax relaxation for big giants who know would push the money back into the economy by investing more .Thus, it is a fiscal policy measure

4)Bernanke gave this statment to new york times and states that it is not fair to buy assets while keeping the interest rate so low and hurt emerging economies instead. It is followed by a weak dollar value reducing export in worl economy , if the gdp is hurt economy will face high prices ,too much flow of money will bring down interest rate but push rampant inflation into the economy. It is a monetary policy effect.

5)This is a fiscal policy impact because government raises tax to increase revenue and meet expenditure , to which economy might face a fall of investment because people start saving more to evade on taxes and focus on their consumption needs.

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