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
a more simple explanation of the group equilibrium in the short and long run

Explain in detail the concept of PPC with suitable eg.


DETERMINATION OF EXCHANGE RATES: When we study the determinants of exchange rates, we must distinguish between long run determinants and short run because the determinants in

Consumers purchase a house or multiple dwellings for a number of reasons. But what is the rationale behind their decision to buy and/or sell a house, flat or apartment? Do consumer

"Assume the local fixed telecommunications company is a monopoly. It costs the company €2 per month to give voice messages service to a customer. Elasticity of demand for voice mes

• If Mary uses all her resources to produce hats, she can produce 48 hats an hour. • If she uses all her resources to produce apple pies, she can make 24 apple pies an hour. how

CROP PATTERNS: Analysis of crop patterns in India should relate to the following aspects:  a) The relative significance of different crops/crop groups in the overall area u

Socialist Economy: The material means of production are owned by the whole community represented by State under socialist form of economy. All members have equal right in the benef

Why might an oligopoly be reluctant to change its price? When some large firms have high total market share and are non-collusive, there is a strong element of interdependency.