United States Macroeconomic Policy Most Term Paper

Length: 4 pages Subject: Economics Type: Term Paper Paper: #65606115 Related Topics: President Of The United States, Fiscal Policy, Us, United States
Excerpt from Term Paper :

With a lower interest rate, that incentive no longer exists and this is usually an instrument by which private entities can be driven out of saving and into investing into new business on the market. Obviously, such an action usually creates the appropriate momentum for economic development, creating jobs, increasing governmental revenues through revenues from taxation and helping the country out of the economic recession.

In terms of fiscal policies, the measures that the government needs to take will all attempt to move the IS curve further to the right and, in this sense, to stimulate the national economy, reduce the period that the country will pass through the recession and determine a national economic growth. There are two important means by which this can be done: increased governmental spending and decreased taxes, with a less restrictive taxation policy. As we can see on the IS - LM graph, both of these measures will move the IS curve to the right.

First of all, an increased governmental spending is a mean by which new jobs can be created and unemployment can be kept...


Governmental intervention in this direction can manifest itself, for example, by new construction projects, including new roads or buildings. While on one hand, this stimulates employment, as individuals will need to be employed in order to complete these public projects, on the other hand, these are also the types of projects likely to stimulate the economy in its entirety and be useful for economic development in the long run.

Second, a decrease in taxation levels, also moving the IS curve to the right, is the appropriate incentive for individuals to start their own businesses and strive to maximize their incomes. Because of lower taxation levels, they will be more inclined to use their savings to create their own businesses rather than to save the respective values. This will create the right momentum for the aggregate economy as well.

As we can see from the previous explanations, the desired consequences for the monetary and fiscal policies previously presented would be for the U.S. To come out of the economic recession it is currently going into. However, some of the short-term effects may not necessarily point out in this direction. For example, decreasing the interest rates may also lower the incentive for foreign investors to spend money on the U.S. market, with a direct impact on the dollar. Nevertheless, in the long run, a weak dollar is likely to have a positive effect, because it will make exports cheaper and will reduce the current account deficit.

On the other hand, the fiscal policy characterized by low taxation levels and increased governmental spending is likely to create the premises for an economic recovery in the long-term. As we have seen, such fiscal measures will create incentives for businesses to pick up and will compensate the potential losses that current businesses are likely to incur, mainly due to pressures because of the economic recession, low demand on the market and higher costs of production. The final objective of both monetary and fiscal policies are to pull the country out of the economic recession.

Cite this Document:

"United States Macroeconomic Policy Most" (2008, April 20) Retrieved June 30, 2022, from

"United States Macroeconomic Policy Most" 20 April 2008. Web.30 June. 2022. <

"United States Macroeconomic Policy Most", 20 April 2008, Accessed.30 June. 2022,

Related Documents
US Monetary Policy
Words: 597 Length: 2 Pages Topic: Economics Paper #: 17450629

U.S. MONETARY POLICY IN THE 1990s Monetary Policy Monetary policy refers to actions the Federal Reserve (Fed) takes to influence the amount of money and credit in the U.S. economy. Interest rates and the performance of the economy are affected by what happens to money and credit. The rapid increase in the supply of money and credit over time could result in inflation, a sustained increase in the general level of prices,

Macroeconomic Policy Jan 20, 2021,
Words: 1160 Length: 4 Pages Topic: Economics Paper #: 15128407

2004). The new Fed chairman would necessarily have to monitor inflationary pressures to prevent spikes in the cost of living. On this note the new Chairman would move from a policy of targeting core inflation which excludes the so called volatile food and energy prices, and focus on the headline rate which includes these components. Additionally the Consumer Price Index calculation would change to reduce the weight of housing

Business US Has Faced Acute Economic Crisis
Words: 946 Length: 2 Pages Topic: Economics Paper #: 69131532

Business US has faced acute economic crisis since 2008. Present economic crisis started from the downfall of housing sector which lead to the financial crisis such as bankruptcy of Lehman Brothers (at that time fourth largest investment bank in the U.S.A.) and bankruptcy of largest insurance in world, the AIG (which were later saved by introducing bailout packages by U.S. government) which further collapsed production and unemployment plummeted. It is usually

Economic Outlook of the US Economy
Words: 3696 Length: 5 Pages Topic: Economics Paper #: 78714332

Summary Economic forecasting refers to the process of trying to predict the future state of the economy through a series of different indicators. This process helps to understand the probable future of a nation’s economy and for policymaking to help promote economic growth. When developing an economic forecast, various macroeconomic factors/conditions are taken into consideration. This paper provides an economic forecast of the U.S. economy based on recent economic indicators in

Macroeconomic Policy Measures Introduced by the UK
Words: 1813 Length: 5 Pages Topic: Economics Paper #: 94870104

macroeconomic policy measures introduced by the UK authorities in response to the global credit crisis and associated UK recession Macro-economic policy measures This essay is based on two scenarios of financial crisis that occurred consecutively in the United Kingdom and other parts of the World. The recent economic recession started in 2007 up to 2010 while the credit crunch was experienced in 2002 up to 2004. In both of the financial

Macroeconomic Trends in the United States the
Words: 694 Length: 2 Pages Topic: Economics Paper #: 9099741

Macroeconomic Trends in the United States The corner appears to have been turned after the subprime mortgage meltdown and the Great Recession of 2008 that followed. Despite this economic downturn, though, the U.S. economy is well on its way to recovering to pre-recession levels, inflation is at manageable levels and the nation's unemployment level continues to improve. The economic policies and stimulus monies that were used by the current executive