Fiscal policy and monetary policy are the tools the government can use to try to influence the financial sector. For example, the government can implement policies, such as tax cuts, to attempt to stimulate a sluggish economy. For example, you may be familiar with the first-time homebuyer’s credit, which the government offered to help stimulate the real estate market. Have you ever benefited from a tax cut?
For this assignment, you will participate in a discussion about how monetary policy and fiscal policy affect aggregate-demand curves.
Scenario The federal government and the Fed usually try to coordinate their efforts in order to keep the economy stable. However, there are times when the government and the Fed work against each other without intending to. For example, in 2012, Congress passed a universal healthcare plan called The Patient Protection and Affordable Care Act. This law was passed during a time when the Fed was working to stimulate economic spending through monetary policy. However, taxpayers knew that the new law would eventually result in higher taxes. Some economists argued that the passage of the law was one of the reasons that monetary policies had little effect as businesses and consumers continued to hold their money in anticipation of increased taxes.
Instructions
1. In a post to the discussion, respond to the following:
In what ways do you think The Patient Protection and Affordable Care Act might affect the economy? Explain your answer.
In what ways do you think this type of program affects the aggregate-demand curve? The aggregate-supply curve? Explain your answers.