Question

1. Explain who is in charge of fiscal policy and when fiscal stimulus will be needed in an economy.

2. 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!)

3. 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.

4. 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.?  

5. 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

Question 1.Explain who is in charge of fiscal policy and when fiscal stimulus will be needed in an economy.

Answer-The government is in charge of the fiscal policy, the government uses its spendings and tax policies to influence the economic conditions of an economy, which includes aggregate demand of goods and services, inflation, employment rate etc.

When fiscal stimulus will be needed?

A fiscal stimulus is needed in an economy when there's a deficiency in consumption and the aggregate demand of an economy is low,if aggregate demand will be low then automatically the GDP will fall so in order to correct this the government uses fiscal policy through Which they regulate interest rates and tax rates.If the consumption is low government will decrease the interest rate Which will make loans affordable and lead to economic growth.