do you think that the US government has done enough to try and stimulate aggregate demand?

Expert Solution

US government has done enough to try and stimulate aggregate demand.physical policy much more direct way to affect aggregate demand as it can put more directly in the hand of consumers. Especially those who have the greatest marginal propensity to spend. The US government's direct effect onaggregate demand is mild all the the federal reserve can increase aggregate demand in in indirect way by lowering interest rates. When it lowers interest rates assets prices climb. Hire assets price for assets such as home and stocks boost confidence among consumers leading to purchase of larger items and greater overall spending levels. Highest stock prices often lead to companies being able to raise more money at cheaper rates.

Investment can change in response to its expected profitability which in turn is shaped by expectations about future economic growth the creation of new technologies the price of key inputs and tax incentives for investment.
Defenders of monetary policy also says that without monetary policy the economy would be much worse. However it's difficult to quantify.spending and investment play a larger role in determining economic activity in the short and long-term. Therefore in some way the federal reserve and US government is like an accelerator for the economy

Rahul Sunny answered 9 months ago

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