Expansionary Economic Policies
Charlotta McMahon
ECO 203 Macroeconomics
Instructor Sean Bedard-Parker
May 18, 2015
Expansionary Economic Policies
Even though the government has many policies in place to address the various issues they may encounter during a fiscal melt down or recessional break through. The federal government should address expansionary fiscal and monetary policies in order for the fed to make necessary changes in taxes and government spending and the three tools the federal reserve bank (the fed) uses when conducting monetary policy in order to regulate the economy. Fiscal policy according to the text, Amacher & Pate (2012), is the intentional use of taxing or government spending to affect the level of output, employment, and prices. Even if governments change their levels of spending or taxes for other reasons, policy makers are very conscious of the effects these actions will have on output, employment, and the price level, (sec 9.1).
The Keynes thinks the government should address unemployment with fiscal policy. This means that the government should increase aggregated expenditure in order to guarantee socially required stability levels in income and output. (Amacher & Pate, 2012, sec 9.1) Recessions are typically short-term, they last from six to nine months and are noticeable by decreasing employment, output, income, prices, and interest rates. In a recession the government would lower taxes and increase government spending according to the expansionary fiscal policy.
If there is an enflamed expansion a fiscal policy would need greater taxes and condensed spending. Keynes believes that a recession needs debit spending and enflamed expansion needs a reasonable surplus. ("Fiscal vs Monetary Policy," n.d.) One way the government can do this is through the federal budget process. This procedure can take from twelve to eighteen months due to the fact that it is hard to tie discretionary fiscal policy with...