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USE OF FISCAL POLICY TO SIMULATE THE ECONOMY

This is a continuation the above problem. It appears that we both agree that we have identified the economic conditions as recessionary. It appears that the FRB has already tried to stimulate the economy by lowering interest rates and that has proved unsuccessful; therefore, further reductions would probably be futile. We both agree that GDP is very low. Inflation is stable and not very high. Should the economy be left alone to see if it will make the necessary adjustments? Or should the government use fiscal policy and give tax cuts and tax credits? Would this stimulate the economy sufficiently? Or would it be better for the government to do some heavy spending to stimulate this economy. I think the latter would be the best option. Again, am I on the right track? I realize that the last two possibilities would result in a higher budget deficit.

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AS THE ECONMIC CONDITIONS ARE RECESSIONARY. GOVERNMENT MUST USE FISCAL POLICY TO SIMULATE THE ECONOMY. The detail description is as follows:
This is the issue of fiscal policy. Fiscal policy refers to nation's policy relating to the government spending, taxing, borrowing and debt management. The main objectives of the fiscal policy are:
1. Mobilization of resources
2. Acceleration of the economic growth
3. To minimize the inequalities of Income and Wealth.
There are three main constituents of the fiscal policy, these are:
1. Taxation policy
2. Public Expenditure policy
3. Public debt policy
All these ...

Solution Summary

THIS explains the use of FISCAL POLICY TO SIMULATE THE ECONOMY

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