Between 2007 and 2009 the U.S.
economy experienced a severe recession. In an effort to stimulate
the economy, the federal government passed a stimulus package. Explain the
federal government’s use of fiscal policy (the stimulus) to promote growth and
employment. Support your ideas with concepts found in the assigned
reading. Include the following in your response:
- Discuss some actions taken by the federal government
and whether the recession would have been longer and the unemployment rate
higher if the government had not acted by passing the stimulus
- If left alone, do you believe the economy would have
corrected itself as suggested by Classical economic theory? Explain.
- Discuss the effect these policies had on increasing the
size of the budget deficits and the national debt.
Inflation is an
important policy issue because it causes a redistribution of income and wealth,
and discourages saving and investment. Discuss how inflation affects
borrowers and lenders, asset prices, and households on fixed