How Could War Stimulate The Economy?

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Question 1: How could war stimulate the economy? An increased spending by the military can engender some positive advantage via creation of employment as well as extra growth of the economy in addition contributing to the development of technology. This might give a multiplier effect which then gush on to other businesses. By looking into the state of the economy at each and every major conflict since world war II, it is prudent that the positive effect of a rise in military spending were overshadowed by longer term unintentional negative macroeconomic cost. As the stimulatory effect of military expenditure is evidently associated with boost in the growth of the economy, unpleasant effects turn up either immediately or later on, even if…show more content…
Therefore, a rise in government spending helps the economy and a cut in spending will hurt the economy, or even push the economy to a state of recession. Certainly, conservative perception holds that every dollar the government adds to demand or minus from it, will be multiplied by ancillary changes in private spending. A rise in spending of the government might induce the private sector to contract a phenomenon called crowding out. Conversely, a cut in the government spending may release an economic resource the private sector could put to work more productively. Question 1. How government purchases, in your opinion, have helped to stimulate or hinder the U.S. economy Government purchases in the US have hindered the US economy. Government purchases represent a large amount of the GDP, and thereby leading to a decrease in investment and consumption. As a result government increases its taxes so as to be able to sustain itself, and this can lead inflation. Question 2. Do you think the government, using both fiscal policy and monetary policy, faces any trade-offs in trying to control for inflation vs. unemployment. Yes, casting a long shadow over fiscal and monetary policies is the supposed trade- off between jobs and prices. Between the policies that lowers the unemployment rate but pose a higher risk of inflation and those policies that
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