Question

It is time to provide some assessment and consultation on the issue of fiscal policy. Assume for a moment that you are an economic advisor to the President of the United States or to the local congresswoman or congressman.

What economic advise would you provide to them? Remember that you are not a politician, but simply an economist whose goal is to do right by the economy. Would you recommend that they embrace another fiscal stimulus and why yes or no?

Also, please support your decision with current economic data.

Some sites for you to explore while you justify this position are:

Bureau of Labor Statistics (Links to an external site.)

Bureau of Economic Analysis (Links to an external site.)

FRED Economic Data St. Luis FED

Answer 1

I would highly recommend that they should embrace another fiscal stimulus as there is fear of growth rates falling again led by the pandemic as increase in debt levels could be handled in the future, the country now requires as much stimulus as possible, in order to speedfast the pick up in growth rate.

The unemployment rate is still stubbornly high at 8% in September 2020. Although it has fallen steadily from the recent high of 15% in April 2020. It was 8.4% in August, signifying that the decline is not drastic. It signifies that there are still many people unemployed and by providing the stimulus, the government will be able to help in the recovery process as the economy has started to open signficantly, and this is the time when the government should provide as much support as possible otherwise the economic recovery won't be fast.

The U.S GDP also fell drastically in the second quarter of the year by 31%, while it had contracted by only 5% in the first quarter. As exports were hit drastically and as investments were low. In light of fall in future building capacities, the government needs to provide much needed stimulus by increasing the government expenditure component of the GDP, and thus by providing additional fiscal stimulus as it will fastrack the process of an economic recovery and help in the economic trajectory by providing as much fiscal stimulus as possible so that the output picks up faster than expected and other components of the GDP pick up, especially investments and exports.