Question

Describe the characteristics of fiscal policy from 2009 to 2012. Was it expansionary or contractionary?

Answer 1

The Great Recession of 2007 was the longest recession since the World War II. The Gross Domestic Product of the nation had fallen and unemployment rate was very high in the economy. It continued to deepen till March 2019. As the financial crisis and the recession deepened, measures were taken to revive the economic growth. The U.S. government advocated the fiscal stimulus program or expansionary fiscal policy to revive the economy which used various combinations of government spending and tax cuts. The two main programs of the government for fiscal stimulus included Economic Stimulus Act 2008 and the American Recovery and Reinvestment Act of 2009. The main aim of these programs was to increase public spending to save jobs and create new jobs to prevent economic recession and fall in overall growth rate in the economy.