Question

An economic stimulus is an effort by the government to pump money into an ailing economy. Having studied the material presented in this chapter as well as in the last two chapters, discuss the effect of the 2008 - 2009 government economic stimulus packages on the current state of the economy in the United States.

Answer 1

After the recession in 2008, US implemented an efficient monetary and fiscal policy for the regaining of the economy. The economies used different combinations of government spending and tax cuts too boos the current economic conditions. Most of the stimulus plans were based on the Keynesian theory, like the government spending will reduce the demand lost and also prevent the wastage of the resources. In US the president George W Bush signed the Economic Stimulus Act of 2008 which designed to help the stave off recession. Most of the rescue plans were associated with positive returns and also the public intervention will favour the bank which has negative impact. The Economic Stimulus Act provide tax rebates for low and middle income tax payers, several tax incentives were introduced to stimulate the investment of the businessman, increasing the limit of the mortgage which purchased by the government sponsored enterprises. Most of the studies show that this stimulus checks the increased spending which boosts the overall nondurable consumption. This is an effective stimulus method which increases the disposable income.
Most of the revival packages were focused the correct assessment which used against the external shock of the global financial crisis. The measures were the combination of monetary easing and fiscal measures. The US government stepped with massive expensive bailout programmes in the late 2008 until the end of 2009. Many of the banks function were severely affected through this. Though implementing this high level policies enhance the then economic condition to a normal one.