July 26th, 2010
To understand Gross Domestic Policy (GDP) in the measurement of the business cycle, there are three key points. Gross domestic policy is measured using market values, includes only the market value of final goods, and includes only current production (Hubbard, 2010, p. 615). First, gross domestic policy measurement of market value is used to apply the value in production in dollar terms of all goods and services produced. This measurement is calculated by the quantity of goods and services a particular company produces. The second measurement includes only the value of the final goods. This is measured by the purchase price of the final user and does not include production of other goods or services (Hubbard, 2010, p. 615). The third value of measurement is calculating the current production that includes goods and services produced within the same year.
The government bodies that determine the national fiscal policies are the President and Congress. They determine the fiscal policy through changes in purchases from the government and taxes (Hubbard, 2010, p. 904). Changes in purchases that the government makes can produce changes in demand. This can also affect the different level of GDP as well as employment and the price level. When the economy is in a recession, the increase and decrease of government purchases along with taxes will determine the aggregated demand (Hubbard, 2010, p. 904). Decreasing government purchases or raising taxes will slow the combined growth of demand, and the inflation rate will be reduced.
When the government manages fiscal policy poorly, it can crash our economy. During a recession, if the government decreased taxes and increased spending, the economy could be slowed down even further (Hubbard, 2010, p. 915). When the President and Congress agree... [continues]
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