The United States ' Fiscal Policy

1378 WordsApr 26, 20166 Pages
The United States has gone through economic successes and turmoil since its independence in 1776. Some of these peaks and troughs were quite severe, but the economy tends to self-correct itself. Prior to the Great Depression, the United States had a laissez-faire approach to economic matters, including on how to balance the budget. However, once the Great Depression started, economists decided the government needed to be involved in the U.S.’s economic affairs as the unemployment rate reached 25%. The first fiscal policy to be instituted was The New Deal by President Franklin D. Roosevelt, but the results were lower than hoped due to the start of the Great Depression. The New Deal was to provide relief, recovery, and reform to the nation, but the only real accomplishment was relief with the creation of the Works Progress Administration. Government intervention was promoted when World War II started, the deficits increased, and full employment of the military ended the Great Depression. The United States’ fiscal policy today is based on John Keynes theory, that governments can influence macroeconomic productivity levels by fluctuating tax levels and public spending. The theory is to use expansionary and contractionary efforts to steer the economy in the direction the nation needs (Sowell). Another policy, monetary policy, is the central bank’s control of credit available to the economy. If the monetary or fiscal policy is alternated then it will affect the other policy as

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