Government Fiscal Policy
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 package?
- 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.
Reference: Chapter 9, section 9.4: More Recent Tax Changes, and Chapter 10, section 10.2: Early 1990s and 2000s Recessions.