Economic rationale - enacting large fiscal stimulus package, Microeconomics

1) The $787 billion stimulus package, "American Recovery and Reinvestment Act" passed in Winter 2009 contained a mix of tax rebates, tax credits and increases in various transfer payments (such as extension of unemployment compensation). It also contained funding for a large number of infrastructure spending projects and some funding for scientific research. Most republican legislators voted against the proposed stimulus bill on the grounds that it should have contained more tax cuts and less infrastructure/research spending.

A) Briefly explain the economic rationale for enacting a large fiscal stimulus package, given the macroeconomic condition of the US economy four years ago.

B) Describe and contrast the "multiplier effects" on AD of each $1 billion of tax cuts/transfer increases with the "multiplier effects" on AD of each $1billion of increased infrastructure spending. (Which has the larger multiplier effect or are they both the same?) Assume in both cases that the lower tax rates and higher infrastructure expenditure levels would be phased in over a 2 year period and are assumed to continue indefinitely following that. (This answer is worth 6 points implying that some detail is required for full credit ). 

Posted Date: 3/29/2013 2:54:05 AM | Location : United States







Related Discussions:- Economic rationale - enacting large fiscal stimulus package, Assignment Help, Ask Question on Economic rationale - enacting large fiscal stimulus package, Get Answer, Expert's Help, Economic rationale - enacting large fiscal stimulus package Discussions

Write discussion on Economic rationale - enacting large fiscal stimulus package
Your posts are moderated
Related Questions
1) The Economy cannot be considered fully employed unless the measured unemployment rate is below 1%. Agree or disagree and explain your answer in a paragraph. 2) A) Why would y

a) An enhances in the quantity demanded of a good can happen because consumers expect the price of that good to enhance in the near future. b) A price ceiling imposed above the

the prevalence of excess capacity is the direct consequence of the existence of monopolistic competition

Frictional and Cyclical Unemployment: Frictional Unemployment: It refers to unemployment caused by changes in individual labour markets. This is the type of unemploymen

1.  Seller has ample time to adjust to price change. 2.  Buyer's response to small price change is significant. 3.  Buyers are faced with many options when deciding to make a

compare traditional modern and engineering cost curves

The Free Enterprise:  Price System The free market system is where the decision about what is produced is the outcome of millions of separate individual decisions made by cons

what will be the effect on price and quantity when supply and demand changes in different directions but same magnitude?

what is ment by demand

Problem 1: (a) Critically examine the differences between the Neo-classical growth models and the endogenous growth theory. (b) Show the relevance of such models in explain