The Role of Government in Economic Recession, Fiscal Policy. - Essay Example

Only on StudentShare

Extract of sample
The Role of Government in Economic Recession, Fiscal Policy.

Government spending in the 2nd quarter increased by 11% and this spending affected the car industry and the housing market. Inventory also declined in this quarter and this reduced the GDP by 1.39%, however when aggregate demand increases the inventory level is also expected to increase. According to the congress budget office the 3rd and 4th quarter level of GDP is expected to improve due to increased government spending and a 1.6% growth rate is expected. However the recovery process is expected to take longer given that those consumers are faced with high unemployment rate, high debt levels and restricted borrowing. (Alan Rapperport (2009))
The article highlights the role of government in a recession, a recession is characterized by high unemployment rate, declining GDP level and reduced aggregate demand, from the article expansionary fiscal policy has been used to aid the economy out of the recession. However this has resulted into budget deficits which are expected to reach 11.6% of GDP this year.
Fiscal policies include government spending and taxation, in a recession an expansionary fiscal policies is used, this policy measure involves increased government spending that help increase aggregate demand. ...
Download paper

Summary

The article by Alan Rapperport analysis the effect of the economic recession and the role of government in a recession, according to this article the gross domestic production in the US was expected to decline by 1.5% in the 2nd quarter this year, however official figures show that the GDP level declined by only 1%…
Author : sanfordchrist

Related Essays

Fiscal policy and the US economy
'Auerbach and Feenberg (2000) have estimated that automatic tax stabilizers offset about 8% of the impact of an economic shock to GDP.'(Economic Research and Data. The Role of Fiscal Policy. 2002)…
5 pages (1255 words) Essay
Economic Role in Shaping Actions by the Government in 1930-1980
The economic history of this period of 1930 to 1980 will be testimony to this fact.…
6 pages (1506 words) Essay
Effectivess of Foreign Aid as a Form of Multinational Financial Assistanse
This paper presents comprehensive analysis of the effectiveness of the financial aid as a form of foreign assistance to the economy of a recipient country. As a condition for aid money, many donors apply conditions that tie the recipient to purchase products only from that donor. In a way this might seem fair and “balanced”, because the donor gets something out of the relationship as well, but on the other hand, for the poorer country, it can mean precious resources are used buying more expensive options, which could otherwise have been used in other situations. …
7 pages (1757 words) Essay
UK Fiscal and Monetary Policy
[1]…
4 pages (1004 words) Essay
Monetary and Fiscal Policy in the Euro Area
At its beginning stage, in 1990 the EU has made the free capital movement within the euro area and formation of a single market certain. In the second stage the EU introduced the formation of the European Monetary Institute (EMI) in the period of 1994-1999, which is the pioneer of the European Central Bank (ECB). The third and final stage has been traced by introducing the euro currency along with a single and common monetary policy of the European Central Bank in the euro area. It is noted that though each of the member of the EU are also the elements of the EMU, however, the euro area does…
36 pages (9036 words) Essay
What is the "current macroeconomic situation" in the U.S. (e.g. is the U.S. economy currently concerned about unemployment, inflation, recession, etc.)? What fiscal policies and monetary policies would be appropriate at this time?
This was a decline from 2% growth rate recorded in the first quarter (Censky, 2012).…
2 pages (502 words) Essay
Policy Issues
The foreign policy focuses more on the international relationships between countries. All policy makers should be wary of any unintended negative outcomes of policy decisions made.…
2 pages (502 words) Essay
Got a tricky question? Receive an answer from students like you! Try us!