Problem 1: What possible macroeconomic arguments might President Obama use to defend his $862 billion fiscal stimulus package as a part of his economic recovery plans?
Problem 2: Why do you think the critics were so much concerned that this stimulus package might be bad economic policy, and not just for the US, but for the world economy? Does it sound to have a trickle down adverse effect in the current or future financial stability in the US and the World economy, say later in 2011? Do you think this issue is also related to the current political rhetoric between the GOP and Democrats on raising the debt ceiling over $16 trillion? (New debt ceiling proposed by Pres. Obama on Jan 12, 2012:
https://www.foxnews.com/politics/2012/01/12/obama-requests-12t-increase-in-debt-ceiling/)?
Problem 3: What would happen to the growth rate of the money supply if foreigners lost confidence in the US dollar as a result of recent financial crisis in the US economy and the Fed was trying nonetheless to maintain its current historic low federal funds rate target? Explain briefly.
Problem 4: Using the Keynesian Cross model diagram (The diagram with 45 degree line by splitting AD (C+I+G+NX) on the vertical axis and RGDP on the horizontal axis, See in Ch. 9,10 & 13 of the textbook) and equation, critically and briefly illustrate the short run and long run economic impact of Obama's stimulus package of $862 billion.
Many critics however contend that the American Recovery and Reinvestment Act of 2009 were not effective at all except too much budget deficit. But majority economists considered this stimulus package of $862 billion as too small to have a quick recovery. Do you think a second stimulus package is necessary to have a recovery faster in order to get out of this great recession?