Answer & Explanation:*Instructions: Please respond to each policy with a minimum
of 300-word count each. Use APA Format
to include in-text citations and a reference page. Use the source that I
provided for you, here is the reference for it: Sexton, R. L. (2013). Exploring economics (6th ed.). Mason, OH:
South-Western, Cengage Learning. Also, minimum of one outside scholarly source is required for each policy. NO PLAGIARISM PLEASE! Let me know if
you have any questions or concerns. Thank you!
Below is an expansionary fiscal policy recommended to help
the economy that is in recession. Provide further analysis and help identify
other effects of the policy OR explain how it might have arrived at a different
conclusion if the other model was chosen. Do this to both analyses.
Policy 1 (300-word count and references)
Using the Modern Keynesian Model of economics to stimulate
an economy in recession, I would institute policies to stimulate spending and increase demand for goods and services. For
example, a tax credit to purchase durable goods such as washers, dryers,
refrigerators, and stoves, would create or preserve jobs while increasing
demand down the supply chain. A tax credit to purchase a new car or truck, or
build an addition onto your house would have the same effect.
Also, by boosting spending, and creating supply for
products, employers will be able to maintain the level of wages paid to their
workers, which preserves workers incomes that can be used for increased
spending versus pay cuts. Maintaining workers wages also curtails inflation,
which helps the economy recover more quickly.
Policy 2 (300 word-count and references)
Being a fiscal conservative who believes in small
government, it pains me to think of any economic stimulus plan in a positive
light. However, having served in the U.S. Navy while Ronald Reagan was
president, I know first-hand the positive effects of having a government focused
and committed to an active military. Therefore, to help stimulate an economy
which is in a recession, I would recommend that the government increase its spending on the military.
This action would increase employment in many sectors. However, the two areas
which would feel immediate gains are numbers of troops and both domestic and
foreign suppliers. These suppliers would stimulate the manufacturing sector
which in turn must increase employment to ramp up and increase production to
meet this new demand. This very condition came to fruition during the military
expansion in the 1980s. From 1980 to 1987, civilian employment increased 13.2
percent. However, the largest effects regarding employment came in the
procurement sector. Between 1980 and 1985, military procurement orders
increased 112%. This increase in orders was a boon for the suppliers of the
military. Using the Modern Keynesian equation for aggregate demand, AD=C+I+G+X,
this action would increase G, which is government spending. This action
sounds all well and good, but as always, whenever government increases their
debt, it is nearly certain that interest rates will rise. Rising interest rates
will decrease the amount of cash consumers have to spend in the economy which
limits economic growth. Although an increase in inflation is unlikely using
this method to stimulate the economy, the result of less money being put into
the economy due to higher interest rates may very well negate any benefit from
this plan.
read_5.pdf
