Question

Analyze new fiscal policy actions undertaken by the U.S. government throughout the 1980-1990 and describe their intended effects, using macroeconomic principles to explain the actions. Explain the impact of the new fiscal policy actions on individuals and businesses within the economy by integrating the macroeconomic data and principles.

Answer 1

The reagan administration inn1980 proposed lower government spending and lower tax cuts to cutdown unprecedented levels if fiscal deficit of 6% and above and continued till 1983 untill recessionary phase started.

As the recession phase appeared the government reversed its stance to an expansionary fiscal policy by cutting taxes and raising government spending which again caused budget deficits and thus the US Fed made massive borrowing which kept interest rates higher.

Thus net effect on economic growth was subdued and stagnant growth in real GDP was observed with cautious growth in inflation and lower credit finance growth. Consequently the GDP oer capita grew steadily as population rise was constant.