Econ 248 Assignment 2

The 2008 Great Recession helped in restoring economic growth and lowered unemployment. Both fiscal and monetary policies are related ways use to increase the aggregate demand and aggregate supply. So, a shift in the aggregate demand curve to the right is expansionary fiscal policy meaning government spending has to exceed (2012). The G- component aggregate demand help to spend, allowing the C- component of aggregate demand to increase. On the other hand, the monetary policy promotes spending, investments, and lending increasing aggregate demand. During the downturn, the systems concentrate on growing demand total while the supply strategy looked for long-term growth in productivity and efficiency (Pettinger, 2012).

Two macroeconomic variables that decline when the economy goes into a recession are real GDP and investment spending. GDP will decrease because the economy will be producing fewer goods and services overall. Investment spending, spending on new capital, will decrease in order to conserve and spend in other areas. The unemployment rate is one macroeconomic variable that will rise during a recession. If an economy begins producing fewer goods and services, businesses will need fewer employees to meet the production demand.

First, the term recession is identified by N. Gregory Mankiw as “a period of declining real incomes and rising unemployment.” The actions of the Federal Reserve play a major role in struggling against the negative effects of a recession. In doing that, the Fed may use various methods, the most important of which are monetary policies. Monetary

The “IT Revolution” has led to an increase in productivity but also to an increase in the depreciation rate because computers and telecommunications equipment have to be replaced more often. Overall, then: a. b. c. d. The standard of living will unambiguously increase. The standard of living will unambiguously decrease. There is an indeterminate effect on the standard of living. Economic growth will be faster in the new steady state.

Two macroeconomic variables that decline when the economy goes into a recession are real GDP and investment spending. GDP will decrease because the economy will be producing fewer goods and services overall. Investment spending, spending on new capital, will decrease in order to conserve and spend in other areas. The unemployment rate is one macroeconomic variable that will rise during a recession. If an economy begins producing fewer goods and services, businesses will need fewer employees to meet the production demand.

Economical term ‘recession’ means a significant decrease in activity across the economy, which last longer than few months. This phenomenon is visible in employment, wholesale-retail trade, and others. The recession is considered a normal part of the business cycle. Nevertheless, a one-time crisis can trigger the onset of a recession. The global recession through 2007 to 2009 resulted in significant breakdowns to practically all the developed and developing countries. In order to prevent a future financial crisis, numerous government policies were enforced. A recession usually last 6 to 18 months and interest rate fall to stimulate the economy. During a recession, people tend not to spend, borrow, but to save money because of a fall in confidence. The government initiates an expansionary fiscal policy which involves increasing stimulus government spending and cutting taxes. However, the question is can increased stimulus spending help end the recession.

Understanding why economies grow, allows governments to better provide for its citizens through evaluating public policies. More educated decisions by government allows for a good economy. A good economy allows citizens to save a larger percentage of their earnings. The citizens are then more likely to spend money on goods and services. Macroeconomic analysis allows businesses to understand how economies fluctuate, therefore providing the correct products at the right prices to their customers. Businesses make more money due to the spending of the citizens. Macroeconomic analysis allows businesses to make more informed business decisions. Businesses use their knowledge of macroeconomics to predict the effects of current public policies on interest rates, they then decide how and where to borrow the funds saved to purchase machinery and equipment that make their workers more productive and educated. Well-educated workforces allow firms to quickly adopt new technologies that increase worker

‘Discuss the ways in which the government may use Fiscal policy to help the economy grow out of a recession. Reference must be made to some policies that the current government has actually use’

When considering if an economy is in a recession or expansion, the most crucial and imperative factor is determining the Real GDP within the past eight quarters. In the first quarter, Real GDP was 16,547.6, the second quarter was 16,571.6, and the third quarter was 16,663.5 (US). Additionally, the Real GDP in the fourth quarter was 16,778.1, the fifth quarter was 16,851.4, and the sixth quarter was 16,903.2 (US). Finally, Real GDP in the seventh quarter was 17031.1 and increased to a

A recession can be defined as an economic decline in gross domestic product, in which, a nation experiences a downward sloping growth rate. Additionally, recessions tend to have a time range of two or more periods/quarters of falling real gross domestic product (GDP), consequently from the negative sloping economic growth rate. In order to properly define causal factors of a recession, it is most appropriate to elucidate what GDP’s meaning.

In economic terms, a recession is defined as a general slowdown in economic activity. In an effort to move the economy out of a recession, the government would implement expansionary economic policies. One action the government would take would include conducting expansionary fiscal policy. The other action taken would be conducting expansionary monetary policy. Both of these actions would have an effect on such things as money supply, interest rates, spending, aggregate demand, GDP, and employment.

A recession does not just affect the lives of the people in the country that is having a downturn in there economy but also it affect the global economy. The United States have had several economy catastrophes that almost crippled the United State and the rest of the world causing the government to act fast to slow down the economic downward spiral. The United States’ government throughout history has attempted to develop plans to slow down or prevent the country from having a complete economic meltdown. In this paper I will explore two expansionary economic policies, fiscal policy and the monetary policy which the federal government uses to help move the economy out of a recession and effects they have on taxes, interest rate, GDP, and employment.

Answer 2 – I believe a wise combination of fiscal and monetary policy can have a positive effect on inflation and

According to Campbell,R "The term open market operation indicate to the buying and selling of government bonds by the Federal Reserve Bank in the open market –that is ,the buying and selling of bonds from or to com-material bank and general public

By offsetting the decrease of consumption and investments, the automatic increase in government expenditures lessens the impact of a recession on the total GDP.