Question

Explain the tools of the United States Economic Policy.

Answer 1

Neutral: Typically this form of policy is implemented when an economy is in balance. Public spending in this situation is entirely financed by tax revenue, and has a favorable impact on the level of economic activity.
Expansionary: This form of strategy is typically pursued to raise the level of economic activity during recessions. The government spends more money in this case than it receives in the taxes.
Contractionary: The aim of this form of policy is to pay down government debt and to cap inflation. The government spending in this situation is smaller than the tax revenue.

The U.S. has maintained economic policies that have successfully guided international competition and development. The United States has traditionally seen low taxes, less taxation, lower rates of unionization and greater access to international exchange relative to other industrialized democracies. Given some social costs in its pro-business policies, the country has enjoyed superior rates of productivity, capital creation and competitiveness.

A discretionary policy is supported as it helps policy makers to respond to incidents rapidly. Discretionary policy, however, may be subject to complex inconsistency: a government can say it intends to increase interest rates indefinitely to bring inflation under control, but then later soften its stance. This makes strategy impossible and eventually counterproductive.