In this section we’ll learn about fiscal policy which is how actions by the gove

By
Responsive Centered Red Button

Need Help with this Question or something similar to this? We got you! Just fill out the order form (follow the link below), and your paper will be assigned to an expert to help you ASAP.

Order Form

In this section we’ll learn about fiscal policy which is how actions by the government (the President and Congress) can impact the economy. It’s important to remember that fiscal policy refers to changes in government spending and taxes that are done primarily by the legislative branch (Congress) of the government and not the central bank (The Federal Reserve). Actions by The Federal Reserve are known as monetary policy and we’ll cover that section later in the semester. Fiscal policy is often taught as actions by the government to stabilize the economy. Although this is true, changes in government spending and taxes will have economic affects and thus I also like to discuss the role that government spending and taxes have on influencing the economy, with or without the direct intention of stabilization.
There exists two main factors of fiscal policy actions that can influence the economy: increase/decrease taxes and/or increase/decrease government spending. This is, of course, a simplification as there are numerous taxes that can be increased/decreased as well as types of government spending that can be done. Typically, the debate about fiscal policy is which taxes to increase/decrease along with how much and what the government should spend its money on (remember we discussed the composition of government spending in our section on Public Finance). For example, the government could raise/lower taxes on investments, income, or corporations to name a few. The government could, for example, increase/decrease spending on education, the military, or infrastructure, again to name a few.
Federal government expenditures typically comprise about 20% to 25% of GDP. Therefore, it’s important to understand how changes in this spending, in response to some economic shock, will impact the economy. Fortunately, we can use what we’ve learned about the aggregate demand and aggregate supply (AD-AS) model to help us understand such policy impacts.
Discussion
For this discussion you’ll chose one of the following economic scenarios and evaluate a fiscal policy response. Suppose an economy is in long-run macroeconomic equilibrium when one of the following aggregate demand shocks occurs:
a. A stock market boom increases the value of stocks held by households.
b. After learning that consumer confidence in the economy is down, businesses anticipate that a recession in the near future is likely.
c. Home values increase.
d. The exchange rate between the U.S. dollar and the euro change and the U.S. dollar appreciates, trading for more euros than before.
Pick ONE of the above situations and answer the following questions:
Initial Discussion Post:
1. Please title your post with the aggregate demand shock that you chose. What kind of gap—inflationary or recessionary—will the economy face after the shock and why? (2 – 3 sentences)
2. What type of fiscal policies would you recommend to help move the economy back to potential output? Explain the policy and describe how it would impact the aggregate demand and aggregate supply model. (1 – paragraph)
Peer response:
1. Choose 1 peer that chose a different aggregate demand shock from you. In reading their post, do you agree with their analysis? Are there any aspects and/or concepts that you could elaborate on? Or, share some additional aspects about the AD-AS model that you find relevant to their post (1 – paragraph).

How to create Testimonial Carousel using Bootstrap5

Clients' Reviews about Our Services