Week 5 Assignment Expansionary Economic Policy
Expansionary Economic Policy
Cory Pelisek
ECO203: Principles of Macroeconomics
Instructor: Thomas Westover
Monday, March 9, 2015
In economic terms, a recession is classified as a slow growth or lack of growth in economic activity; in order for the economy to get out of the recession, the government must implement expansionary economic policies. The role of government in the American economy extends far beyond its activities as a regulator of specific industries. The government also manages the overall pace of economic activity, seeking to maintain high levels of employment and stable prices. “The activities of government are grouped into three categories: allocation, redistribution, and stabilization. Stabilization and redistribution are conducted primarily through governments in all economic systems. Allocation is a microeconomic activity that is shared by the government and the market to different extents in different systems (Amacher & Pate 2012, chapter 2.4)”. The US economy is the largest economy in the world, with one of the highest GDP per Capita. However, despite its position as the most powerful economy, it now faces many serious economic problems. Some of these are short term, but some of them reflect an underlying weakness. Every ten years or so the United States goes through some sort of recession for various reasons like the internet bubble of the late 90 's to early 2000 's and the mortgage bubble crisis of the late 2000 's to currently.
Historically, the degree to which the government has played a role in the economic structure of the country has defined the large differences in the outlook and well-being of the citizens of the United States. Two economic schools of thought are classical and Keynesian. Each school takes a different approach to the economic study of monetary policy, consumer behavior and government spending. “In a Keynesian model, financial markets are linked to aggregate supply and aggregate demand primarily
Cory Pelisek
ECO203: Principles of Macroeconomics
Instructor: Thomas Westover
Monday, March 9, 2015
In economic terms, a recession is classified as a slow growth or lack of growth in economic activity; in order for the economy to get out of the recession, the government must implement expansionary economic policies. The role of government in the American economy extends far beyond its activities as a regulator of specific industries. The government also manages the overall pace of economic activity, seeking to maintain high levels of employment and stable prices. “The activities of government are grouped into three categories: allocation, redistribution, and stabilization. Stabilization and redistribution are conducted primarily through governments in all economic systems. Allocation is a microeconomic activity that is shared by the government and the market to different extents in different systems (Amacher & Pate 2012, chapter 2.4)”. The US economy is the largest economy in the world, with one of the highest GDP per Capita. However, despite its position as the most powerful economy, it now faces many serious economic problems. Some of these are short term, but some of them reflect an underlying weakness. Every ten years or so the United States goes through some sort of recession for various reasons like the internet bubble of the late 90 's to early 2000 's and the mortgage bubble crisis of the late 2000 's to currently.
Historically, the degree to which the government has played a role in the economic structure of the country has defined the large differences in the outlook and well-being of the citizens of the United States. Two economic schools of thought are classical and Keynesian. Each school takes a different approach to the economic study of monetary policy, consumer behavior and government spending. “In a Keynesian model, financial markets are linked to aggregate supply and aggregate demand primarily
References: Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc. Gorton, G., & Metrick, A. (2013). The Federal Reserve and Panic Prevention: The Roles of Financial Regulation and Lender of Last Resort 27(4), 45-64. doi:10.1257/jep.27.4.45 Investor Dictionary (2015) McCallum, B. T. (1987). The Development of Keynesian Macroeconomics. American Economic Review, 77(2), 125. Tas, B. O., & Cunedioglu, H. E. (2014). How Can Recessions Be Brought to an End? Effects of Macroeconomic Policy Actions on Durations of Recessions