Question:
Aggregate expenditure is the total amount of spending in the economy that determines the level of the GDP. Components of aggregate expenditure are autonomous expenditure, planned private investments, government expenditure, and net exports. When autonomous expenditure increases or decreases, it has a multiplied effect on the GDP.
Referring to the 10-year historical period that you chose for your final project, discuss an example of a change in autonomous spending. Research a government policy implemented during that time and discuss the multiplier effect it had on the economy.
In your response posts to your peers, comment on the conclusions drawn by your peers regarding the multiplier effect. Choose you agree or disagree with, and provide constructive critique, supporting your opinion by researching a source to back it up.
Answer:-
In the 80s, United States was in a mini recession in the beginning of the decade and in order to get out of it, Reagan imposed a 25% tax cut on personal income while still spending the same amount. With this, the people have more spending income and the consumers put the money back in the economy. The government also started to spend even more on military and weapons manufacturing. The play as to outspend and out-manufacture the USSR and make sure they go into a debt that they wouldn't be able to get out of. Priveate investments were at a low since the debt was increasing with the spending the the government was doing and net exports were not on a high but imports were coming in quickly, especially automobiles.
McCaleb, Thomas S, Cato Institute Policy Analysis No. 45: Deficits and Taxes: Federal Budget and Fiscal Policy in the 1980's, December, 19, 1984, https://object.cato.org/pubs/pas/pa045.pdf