Question

1. Explain why we expect the government to run deficits during a recession even if there is no new fiscal policy enacted. (Make sure you talk about both the spending reason and the tax reason for this!)

2. Summarize what you learned from the New York Times article about arguments around pandemic deficit spending. There are many economists quoted in the article. Choose one quote from the article you find most helpful and explain why.

3. Summarize what you learned from the IMF article about public investment. How would you expect an increase in spending on private investment to impact the debt/GDP ratio for the U.S.?

4. If you were advising lawmakers, what would you recommend the U.S. fiscal policy response should be right now? Explain what you would recommend and how you expect it to impact our economic outcomes of unemployment, inflation, economic growth, and the debt/GDP ratio.

Answer 1

Ans.1 Introdcution:

Recession: Recession is period that describes the contraction in spending and economic activity got decline.During that period people have less money in their hand that leads to less spending ,lesser jobs,Decline phase of can be seen.

Goverment run deficit during Recession :

Whenever goverment spending is more than the govement revenues that comes from taxes than govement run deficit .To overcome recession Goverment decrease the tax percentage and start spending more to give employement and to create demand in the economy ;to boost economic activity .It leads to increase in  Goverment spending and decrease in revenues that generate from taxes.It decreases the goverment  saving  that creates the senario of Budget deficit .