How to Stimulate the Economy Essay

Along with moral suasion, persuasion to get consumers to buy, and open market operations, the buying and selling of government securities in financial markets, the easy money policy can only help supply-side economics in it's route to ending a recession and gaining economic stability. All of these policies combined, supply-side, easy money policy, open market operation, and moral persuasion, can all have an impact on important issues. Some of these issues are employment, international trade, and inflation.

For the economy, I want to strengthen our economy by creating jobs for American workers by ending tax loopholes for corporations. Providing tax cuts to small businesses and investing in a clean-energy economy, while putting Americans to work will rebuild our infrastructure. I would start by providing stimulus for the economy by giving everyone money to spend. When everyone gets the money back, they will simply spend it on products that will put the money back into the economy and jump start the economy and production. I am against waivers for private colleges because it does not work for the less fortunate part of the economy that cannot afford a way of transportation, for their child to get to the private school. The economy needs to cut taxes on small businesses so that those small businesses can grow and growth is what America needs. Part of the way I wish to see America grow is by increasing to our military and keeping us safe, because if we do not insure our safety and security than our efforts to rebuild our economy would have been for nothing.

Government activities have a powerful effect on the US economy in stabilization and growth which is the most important are. The federal government guides the pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. They do so by adjusting spending and fiscal policy- tax rates- or managing money supply and controlling use of monetary policy-credits. It slows down or speeds up the economy’s rate of growth, which affects the level of prices and employment. After the Great Depression in the 1930’s, recession (high unemployment) was

Because the governments’ prevailing economic theory was based on laissez-faire economics, the government believed that recessions were self-correcting. Eventually unemployment and inflation stopped declining, but not before the U.S. lost 1/3 of it’s output and 25% of the workforce was unemployed.

Ensure health and retirement security. Continue to implement the Affordable Care Act (ACA), which will provide financial incentives for businesses to contribute to health coverage and sliding-scale tax credits for workers who do not get coverage at work. Add a public option to further control costs. Ensure states implement the option under the ACA to expand Medicaid to cover workers who earn less than 133 percent of the federal poverty level—$31,000 for a family of four. Protect Medicare benefits by controlling costs through incentives to increase quality and enforceable budgets. Do not cut Medicare benefits or replace its guarantee of benefits with a voucher for private insurance. Ensure all workers have a secure retirement plan. Strengthen Social Security by eliminating

For more than a decade, from 1929 to 1940, America’s economy failed to operate at a level that allowed most Americans to attain economic success. A worldwide depression struck countries with market economies at the end of the 1920s. Although the Great Depression was relatively mild in some countries, it was severe in others, especially in the United States. The Great Depression left the American economy in ruins with problems that would take decades to fix. Government involvement increased in an effort to reconstruct our recession stricken economy.

It widely recognized that the monetary policy within a country should be primarily concerned with the pursuit of price stability. However, it is still not clear how this objective can be achieved most effectively. This debate remains unsettled, but an increasing number of countries have adopted inflation targeting as their monetary policy framework. (Dr E J van der Merwe, 2002) This topic of Inflation targeting is a subject which immediately conjures different perceptions from different people. Many feel that low inflation should be a main aim of monetary policy, while others (such as trade union activists) believe that a higher growth rate to stimulate jobs should be the main concern.

Since the beginning of time people have been affected by their income and ability to accumulate wealth. People live their lives spending or saving money based on their own expectations of what the economy might do. For hundreds of years we have studied how the economic decisions of individuals and governments affect the welfare of society as a whole. John Maynard Keynes introduced a new economic theory that emphasized deficit spending to help struggling economies recover. Keynesian economics revolutionized the traditional thinking in the science of economics. His ideas and theories were deemed radical for his time but were later enacted by some of the largest governments in the world including the United States during the Great Depression. President Franklin Roosevelt enacted the New Deal in an attempt to stimulate the economy through government spending. In this paper I will be giving background to the history economics, the Great Depression, the New Deal, the development of Keynesian Economics. This paper will focus on analyzing the following question: In an attempt to address high unemployment and economic contraction, was Roosevelt’s The New Deal efficacious in stimulating the economy and ending the Great Depression?

The economic meaning of a recession is that the gross Domestic Product (GDP) has declined for two or more consecutive quarters. Unemployment rises, housing falls, stocks fall and the economy is in trouble. Whenever the government sees that the economy is entering a recession it is important for it to act. The U.S acted in two ways during the Great recession of 2008 through fiscal and monetary policies. Renaud Fillieule identifies that “ Monetary and credit expansions have been the main tools used by the U.S. government and central bank to try and recover economically from the Great Recession of 2008” (Fillieule r, Pg. 99 2016). These Keynesian policies are debatable among economist, none the less they were implemented and put the U.S on the road to recovery.

Recession cycles are thought to be a normal part of living in a world of inexact balances between supply and demand. What turns a usually mild and short recession or "ordinary" business cycle into an actual depression is a subject of debate and concern. Scholars have not agreed on the exact causes and their relative importance. The search for causes is closely connected to the question of how to avoid a future depression, and so the political and policy viewpoints of scholars are mixed into the analysis of historic events eight decades ago. The even larger question is whether it was largely a failure on the part of free markets or largely a failure on the part of government efforts to regulate interest rates, curtail widespread bank failures, and control the money supply. Those who believe in a large role for the state in the economy believe it was mostly a failure of the free markets and those who believe in free markets believe it was mostly a failure of government that compounded the problem.

How can monetary policy and fiscal policy greatly influence the US economy? Keynesian economics says, “A depressed economy is the result of inadequate spending .” According to Keynesian the government intervention can help a depressed economy through monetary policy and fiscal .The idea established by Keynes was that managing the economy is a government responsibility .

     With America in recovery from the attacks on our freedom and our economy, many wonder if we will return to phase one (expansion) and how long it will take to reach phase two (recession) again. The Keynesian Theorists of America believe that the government should actively pursue Monetary policies (enacted by the Federal Reserve Bank) and Fiscal policies (enacted by Congress) to reach adjustments to price, employment, and growth levels. In our full market economy, we must use these economic policies to control aggregate demand. When these policies are used to stimulate the economy during a recession, it is said that the government is pursuing expansionary economic policies.

Economic growth refers to the rate of increase in the total production of goods and services within an economy. Economic growth increases the productivity capacity of an economy, thereby allowing more wants to be satisfied. A growing economy increases employment opportunities, stimulates business enterprise and innovation. A sustained economic growth is fundamental to any nation wishing to raise its standard of living and provide a greater well being for all. Gross domestic product (GDP) is the monetary value of all final goods and services produced over a year. It is the total value of production within the economy. The total value of production is the total value of the final goods or services less the cost of

Increased spending on investment adds to aggregate demand and helps to restore normal levels of production and employment.Fiscal policy, on the other hand, can provide an additional tool to combat recessions and is particularly useful when the tools of monetary policy lose their effectiveness. When the government cuts taxes, it increases households’ disposable income, which encourages them to increase spending on consumption. When the government buys goods and services, it adds directly to aggregate demand. Moreover, these fiscal actions can have multiplier effects: Higher aggregate demand leads to higher incomes, which in turn induces additional consumer spending and further increases in aggregate demand.Traditional Keynesian analysis indicates that increases in government purchases are a more potent tool than decreases in taxes. When the government gives a dollar in tax cuts to a household, part of that dollar may be saved rather than spent. The part of the dollar that is saved does not contribute to the aggregate demand for goods and services. By contrast, when the government spends a dollar buying a good or service, that dollar immediately and fully adds to aggregate demand.

Monetary policy involves manipulating the interest rate charged by the central bank for lending money to the banking system in an economy, which influences greatly a vast number of macroeconomic variables. In the UK, the government set the policy targets, but the Bank of England and the Monetary Policy Committee (MPC) are given authority and freedom to set interest rates, which is formally once every month. Contractionary monetary policy may be used to reduce price inflation by increasing the interest rate. Because banks have to pay more to borrow from the central bank they will increase the interest rates they charge their own customers for loans to recover the increased cost. Banks will also raise interest rates to encourage people to save more in bank deposit accounts so they can reduce their own borrowing from the central bank. As interest rates rise, consumers may save more and borrow less to spend on goods and services. Firms may also reduce the amount of money they borrow to invest in new equipment. A