Introduction to the American Economy Weekly Problem #7: Fiscal Policy Assume tha
ID: 1253131 • Letter: I
Question
Introduction to the American EconomyWeekly Problem #7: Fiscal Policy
Assume that you have an economy that is in the early months of a recession. Unemployment is 7.2% and rising. Inflation is at 1.2% and relatively stable at the level. The GDP is at $13.6 trillion. Assume that you are on the Council of Economic Advisors which is the group that advises the President on economic policy issues. It’s your job to propose an Expansionary Fiscal Policy to help alleviate the problems associated with the recession.
1. Start with a policy based on Government Expenditures. Develop a policy that will help get the economy out of the recession using only changes in government purchases of goods and services. You don’t need to get into changes in specific programs but you do need to explain whether the spending should increase, decrease or stay the same. Be sure to explain why the policy will be successful.
Explanation / Answer
Our policy would be not to expand government spending at all, but to decrease it drastically and keep the decrease while we remain in office. There is not a policy to get the economy out of a recession period; we would leave it alone. A reccession is part of the business cycle, interfering only prolongs it. Some businesses would go bankrupt some would not. This is simple competion. Ever heard the phrase a phoenix rises out of a dead pheonix's ashes. This is excatly what would happen new businesses would rise out of the failing ones. Then the bad businesses would be taken out and we are allready on our way out of this recession! We didn't do anything we just let the economny take its course. This new business would create jobs and expand to lower the employment. Then other business would have to expand as well to keep with the new ones. Just look at the 20th century great example of this. First half A&P grocerices were great and could provide the cheapest grocerices then came Wal-Mart which brought us all lower prices and A&P could not keep up which resulted into drastic downsizing for them. Recessions are just like a bodily function to clean you out, the economy needs that to. Our policy would also make sure that this 1.2% inflation is not held down by an artifical interest rate because when it shoots up to real market value it would be even worse then the situation we are in now. Our policy would be extremly successful and we would be out of the recession in .5 to 1.5 years. This would be all because we did not get involved and let it take its course, it has worked in the past and will work again.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.