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
Question 1: i) Use a simple human capital model to explain the rationale for undertaking higher education. ii) Why do some people vary significantly in the amounts of human

(a) Increase in technology and productivity take effect in the red bull market use and label a graph to explain the result of this change on each of the following (i) Market Pri

hoe does the knowledge of price elasticity of demand important to the government

discuss the problems of measuring productivity in actual work situations. how might productivity be measured for each of the following industries: education, government and manufac

what is the formula for finding gross national product?

what is a perfect competition and how does it differ from monopoly?

group trend including ionic and atomic radii,electron affinity,electronegativity,charge density and ionization potential

explain consumer equilibrium diagrammatically as well mathematically by using necessary and sufficient conditions

If producers expect future prices to enhance, current supply will decline in favor of selling inventories at higher prices later.  In other words, supply will reduce (a shift to th

A major component of the costs of many large firms is the cost associated with ordering and holding inventory. If the yearly demand for the good is D and the size of each order pla