Question

Last names beginning with A-E:

Assume that you are the U.S. president and that the country is experiencing a recession. What type of fiscal policy would you enact in order to address the recession? Be specific with your policy recommendations. What would happen to equilibrium GDP, inflation, and unemployment as a result of your policy recommendations? Why?

Last names beginning with F-J:

Assume that you are the U.S. president and that the country is experiencing a high rate of inflation. What type of fiscal policy would you enact in order to address the inflation? Be specific with your policy recommendations. What would happen to equilibrium GDP, inflation, and unemployment as a result of your recommendations? Why?

Answer 1

Answer 1:- Expansionary Fiscal policies can be helpful for addressing the issue of recession in a country. Since the country is facing recession increasing the money supply in the economy in the country will help due to the multiplier effect. As the US president I will take the following policy decisions in order to address recession:-

Decreasing Income Tax so that the disposable income in hands of public increase and demand increases in the market, it will give the required push to the economy.

Business taxes could be reduced. Due to it companies will make more profits after tax and they will have more money to invest in the market.

Government can increase its spending, by increasing spending on final goods and services.

All these steps will increase the money supply in the market, demand will increase and to match it supply will increase. Jobs will be created for matching the supply. On one hand it will decrease the unemployment rate but it can also cause inflation. GDP of the country will increase due manufacturing of goods and services.