fiscal stimulus

Examples of fiscal stimulus in the following topics:

• Arguments For and Against Fighting Recession with Expansionary Fiscal Policy

  • Expansionary fiscal policies involve reducing taxes or increasing government expenditure.
  • Due to the funding process of expansionary policy, there is a lack of consensus among economists with respect to the merits of fiscal stimulus.
  • This may in turn reduce aggregate demand for goods and services, which defeats the purpose of a fiscal stimulus.
  • Fiscal stimulus is implemented with the view that tax relief through a reduction in tax rate and or direct government spending through investment (infrastructure, repair, construction) will provide stimulus to increase economic growth by directly influencing consumption or the government expenditure component of GDP .
  • Evaluate the pros and cons of fiscal policy intervention during recession

• Long-Run Implications of Fiscal Policy

  • Economists still debate the effectiveness of fiscal policy to influence the economy, particularly when it comes to using expansionary fiscal policy to stimulate the economy.
  • This causes a lower aggregate demand for goods and services, contrary to the objective of a fiscal stimulus.
  • Other possible problems with fiscal stimulus include inflationary effects driven by increased demand.
  • Similarly, if stimulus capital is invested in creating jobs, the overall spending in a given economy will increase (that is, if jobs are actually created).
  • If a country pursues and expansionary fiscal policy, high inflation becomes a concern.

• Effect of a Government Budget Deficit on Investment and Equilibrium

  • As the economy grows more quickly, the budget deficit falls and the fiscal stimulus is slowly removed.
  • Unlike the cyclical budget deficit, a structural deficit is the result of discretionary, not automatic, fiscal policy.
  • While automatic stabilizers don't actually shift the aggregate demand curve (because transfer payments and taxes are already built into aggregate demand), discretionary fiscal policy can shift the aggregate demand curve.

• Evaluating the Recent United States Stimulus Package

  • The American Recovery and Reinvestment Act of 2009 (ARRA), otherwise known as the Stimulus or The Recovery Act, was an economic stimulus package was signed into law on February 17, 2009.
  • The primary justification for the stimulus package was to minimize unemployment.
  • One year after the stimulus, several independent firms, including Moody's and IHS Global Insight, estimated that the stimulus saved or created 1.6 to 1.8 million jobs and forecast a total impact of 2.5 million jobs saved by the time the stimulus is completed.
  • Since the stimulus only is impactful when the money is actually spent, delays could have reduced the overall effectiveness of the stimulus.
  • Summarize the effects of the use of stimulus in the wake of the Great Recession

• Recovery

  • The objective of economic recovery when in crisis is to stabilize the economy and recapture the value lost using economic stimulus strategies.
  • The objective of economic recovery when in crisis is to stabilize the economy, and from there recapture the value lost through economic stimulus strategies while addressing the factors which contributed to the collapse in the first place.
  • The stimulus package can be broken down via the attached figure in regards to monetary investment in specific places , totaling $831 billion (USD) between 2009 and 2019.
  • Instead, the government demonstrated that, as long as certain fiscal influence is achieved, these competitive rules are negligible.

• Fiscal Policy and the Multiplier

  • Fiscal policy can have a multiplier effect on the economy.
  • The size of the multiplier effect depends upon the fiscal policy.
  • The size of the shift of the aggregate demand curve and the change in output depend on the type of fiscal policy.
  • The multiplier effect determines the extent to which fiscal policy shifts the aggregate demand curve and impacts output.
  • Describe the effects of the multiplier beyond its relevance to fiscal policy

• Defining Fiscal Policy

  • Fiscal policy is the use of government spending and taxation to influence the economy.
  • Fiscal policy is the use of government spending and taxation to influence the economy.
  • Governments use fiscal policy to influence the level of aggregate demand in the economy in an effort to achieve the economic objectives of price stability, full employment, and economic growth.
  • In times of recession, the government uses expansionary fiscal policy to increase the level of economic activity and increase employment.

• Bernanke Era

  • The primary structural changes include increases in the economic stability of developing nations and the diminished influence of monetary and fiscal policy.
  • His comments were directed at Congress and the President since reform in fiscal exercise is not in the power of the Federal Reserve.
  • Throughout his time as chairman, Bernanke has influenced the financial crisis, the Wall Street bailout, and the economic stimulus.

• How Fiscal Policy Relates to the AD-AS Model

  • When setting fiscal policy, the government can take an active role in changing its spending or the level of taxation.
  • Expansionary fiscal policy is used to kick-start the economy during a recession.
  • A contractionary fiscal policy is implemented when there is demand-pull inflation.
  • In pursuing contractionary fiscal policy the government can decrease its spending, raise taxes, or pursue a combination of the two.
  • Contractionary fiscal policy shifts the AD curve to the left.

• Limits of Fiscal Policy

  • Two key limits of fiscal policy are coordination with the nation's monetary policy and differing political viewpoints.
  • Fiscal policy is also a source of significant political conflict along party lines.
  • Fiscal conservatism was the dominant position until the Great Depression.
  • How effective fiscal policy is depends on the multiplier.
  • There are two different approaches to fiscal policy in the US.