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timer Asked: Oct 25th, 2018
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Question description

1) Between 2007 and 2009 the U.S. economy experienced a severe recession. In an effort to stimulate the economy, the federal government passed a stimulus package. Explain the federal government’s use of fiscal policy (the stimulus) to promote growth and employment. Support your ideas with concepts found in the assigned reading. Include the following in your response:

  • Discuss some actions taken by the federal government and whether the recession would have been longer and the unemployment rate higher if the government had not acted by passing the stimulus package?
  • If left alone, do you believe the economy would have corrected itself as suggested by Classical economic theory? Explain.
  • Discuss the effect these policies had on increasing the size of the budget deficits and the national debt.

Reference: Chapter 9, section 9.4: More Recent Tax Changes, and Chapter 10, section 10.2: Early 1990s and 2000s Recessions.






2) Between 2007 and 2011 the federal budget deficit grew from $160.7 billion to $1,299.6 billion, and the national debt grew from $8.9 trillion to $14.8 trillion. (Figure 10.1: The ratio of debt to GDP, 1977-2011.)

In your post, differentiate the budget deficit from the national debt. How do you think the increases in the budget deficits and the national debt will affect the economy in the future?

Reference: Chapter 10, section 10.1: Debt and Deficits, and section 10.4: Do Deficits Matter?

Tutor Answer

Watsonn
School: University of Virginia

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Name 1
Name
Professor’s Name
Subject
Date
Economic Discussion
1.
Fiscal policy refers to government actions through taxes and spending to influence the
level of economic activities, inflation, and economic growth. Different policies were passed by
the federal government during the recession period including the reduction of federal funds rate
from the initial 5.25 to a range of 0-0.25 with the aim of lowering the term structure of interest
rates and increase the inflation expectations. The American Recovery and Reinvestment Act
(ARRA) of 2009 was also passed to help stabilize the financial...

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Anonymous
Awesome! Exactly what I wanted.

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