Expansionary Economic Policy
Focus of the Final Paper
In an effort to move the economy out of a recession, the federal government would engage in expansionary economic policies. Describe the actions the government would take in
conducting expansionary fiscal policy and expansionary monetary policy.
Expansionary Fiscal Policy:
Review Chapter 7: Classical Macroeconomics and the Keynesian Challenge and Chapter 9: Taxes, Government Spending, and Fiscal Policy.
Explain the actions the federal government would take while engaging in expansionary fiscal policy in terms of the following:
The necessary change in taxes and government spending,
The effect on aggregate demand, GDP, and employment.
Expansionary Monetary Policy:
Review Chapter 12: Banking and The Federal Reserve System and Chapter 14: Monetary Policy In Theory And Practice.
Identify the three tools available to the Federal Reserve Bank (The Fed) when conducting monetary policy. Explain whether the Fed would:
Increase or decrease the required reserve ratio
Increase or decrease the discount rate
Buy or sell government securities when conducting expansionary monetary policy
Explain how these actions would affect the money supply, interest rates, spending, aggregate demand, GDP, and employment.
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