Fiscal policy and the US economy - Essay Example

Only on StudentShare

Extract of sample
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)
Mere anticipation of projected fiscal action can have an impact on the U.S. economy. Households and business enterprises will operate their individual spending habits based on both present economics as well as future economics. For instance, a tax cut will leave households will more disposable income, however, if the tax cut is looked upon as a temporary measure it will not contribute to increased consumer expenditure. Similarly, investment tax credits which will only lower the cost of investment ventures on a temporary basis will likely encourage investors to time their spending so as to capitalize on the tax credit initiatives. It is therefore imperative that fiscal policy be considered and conducted in such a manner as to take into consideration the likely impact of both the current and future implications.
'When expectations of future fiscal policy are important, "expansionary" fiscal policy-an increase in government spending, for example-may actually be contractionary'. (Economic Research and Data. The Role of Fiscal Policy. ...
Download paper


The U.S. government's fiscal policy is a tool by which the government seeks to manage the general growth and maintenance of the country's economy. The U.S. government's fiscal policy is a mechanism by which the country's taxes and spending is determined. Generally, the government's fiscal policy entails making spending adjustments and directing tax rates…
Author : yrunolfsson

Related Essays

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...
4 pages (1004 words) Essay
American Economy and Fiscal Policy
To extrapolate this concept further is to eventually lead to the questions that are highly important today considering whether unregulated free market economics is the path to prosperity or is it rather government regulation that puts the brakes on greed.
2 pages (502 words) Essay
Impact of Oil Prices on the US Economy
Although the rise in prices of oil has been large it has not been sudden and the economies of the major economic powers have adjusted to the change. The rise in oil prices will definitely result in an across the board change in prices and thus inflation rates will continue to be high. However the likelihood of this leading to a recession in the US and other large economies of the world is remote.
7 pages (1757 words) Essay
UK Fiscal and Monetary Policy
4 pages (1004 words) Essay
Fiscal Policy Simulation
In 2008, however, as the economy continues to expand, inflation has surged up to 10.05%. A very high figure from the previous years, to address the inflation is the major aim of the government. In order to address the inflation, the government has adopted a contractionary fiscal policy, which entails decrease in expenditure for infrastructure of 600 million, decrease in spending in the educational programs, and decrease in the income tax rate. The effects of these changes include a taming of the inflation rate, down to 5.30%. However, as what economics is about, there is always a...
2 pages (502 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
US Government / Public Policy
The framing of public policy by the government is sequential in its scope and the first step in this sequence primarily happens to be the identification of the issue or problem regarding which the public policy is to be formulated (Shafritz 56). For the policy to be framed regarding a particular issue, it is imperative that that issues comes on the government agenda (Shafritz 56). To do this the issue has to be serious and should be of such immediate societal importance that it attracts the government attention (Shafritz 56). For instance America is a capitalist society and the legal system in...
2 pages (502 words) Essay
Got a tricky question? Receive an answer from students like you! Try us!