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This post addresses if politicians understand macroeconomics

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Presidents, senators and members of congress come from a variety of different backgrounds but all must decide upon a great many issues that involve macroeconomics. Do you think politicians understand macroeconomics? As a related question, do you think politicians act in the best economic interests of the country or do they make decisions based on other considerations? Give an example to illustrate your answer.

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Solution Preview

I do think that politicians understand macroeconomics, but I don't think that they understand it to any great degree. The Economic Stimulus Act and other expansionary fiscal policies are a good example. When the Economic Stimulus Act went into effect, the point was to give a tax rebate to taxpayers, which put money in the taxpayer's pocket. The sole intention of the stimulus was to act in this way -- the taxpayer files their income taxes and they get a refund in the form of a stimulus payment for X amount of dollars. A few weeks later, the taxpayer actually receives the stimulus payment. The taxpayer then goes out into the economy and spends the full amount of the stimulus payment (it ...

Solution Summary

The solution provides a detailed discussion examining if politicians really understand macroeconomics, or if they make decisions based on other considerations. Examples are also given to support the discussion answer.

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