Expansionary or Contradictionary

Topics: Barack Obama, United States, Keynesian economics Pages: 2 (462 words) Published: June 3, 2013
The American government manages the overall pace of economic activity and looks to sustain high employment levels and stability in prices. In order to achieve these goals the government uses Fiscal and Monetary policy. Fiscal policy is used to determine the appropriate level of spending and taxes, whereas monetary policy manages the supply of money in the economy. When the economy enters a recession, governments stimulate it with deficit spending, whereas during an economic growth governments control it with higher taxes to achieve a surplus. These policies are based on the concepts of British economist John Maynard Keynes (1883-1946). Consumers mainly influence fiscal policy by their spending habits. For instance, if they become concerned about the economy they will save more and spend less, which will result in less production, increase in unemployment level and an overall lower spending rate. In general, the power is held by the consumer. If we become more reasonable with our spending, saving and investing for the better, this would positively impact our economy. (Brooks) During the past few years, the government of the United States has mostly been in an expansionary mode of fiscal policy. President Barack Obama signed the American Recovery and Reinvestment Act in year 2009, which provided lower taxes, loans and contracts and expanded rights. It was estimated that in 10 years time the legislation will increase the budget deficit of the United States by $787 billion. Research shows that the Recovery act maintained nearly 700 000 jobs in 2010. Taking in consideration president Obama took upon the office in one of the worst economic states after President Bush, he signed the Recovery Act almost immediately to bring back economic growth. In result, 6.35 million jobs were available for a period of 3 years and 3.5 million jobs by the end of last year. Had this act not been signed, the U.S. would have had 8.5 million jobs less and the rate of GDP would have been...

References: Brooks, C. (n.d.). Retrieved from http://www.businessnewsdaily.com/3484-fiscal-policy.html
The White House. (2013). The recovery act. Retrieved from
http://www.whitehouse.gov/economy/jobs/recovery-act
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