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This post addresses short-run and long-run fiscal policy.

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What has been, and what will be, the short-run and long-run impact of the Federal fiscal policy that has been followed in the past few years?

To answer this question, you need to look back at the last 10 years of fiscal policy, and pick one (ONLY 1) policy - I repeat, only 1! Initial responses with more than one policy will not count for your initial response. This will ensure that everyone has an opportunity to pick a different policy and we can have a nice robust discussion.

Discuss the ramifications of the policy, presenting either a historical, or current example from the business perspective, and feel free to chime in on other policies and relate how the policy that you have chosen may be impacted by other policies.

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Solution Preview

The Economic Stimulus Act of 2008 had both short-run and long-run consequences, many of which were unexpected. During the 2007-2008 recession, an expansionary fiscal policy was enacted, which provided stimulus payments to all taxpayers. Stimulus payments are money-in-hand for the taxpayer. The taxpayer has to do nothing to qualify, except to file an income tax return, which is how the stimulus payment is generated. Basically, the taxpayer files their tax return, and the stimulus payment is then sent to the taxpayer. Single taxpayers were given average stimulus payments of $600 for an individual and $1,200 for a married couple. The point of the stimulus check is to give the taxpayers money, and the taxpayers then take that money and go out and spend it in the economy. Because it is a recessionary ...

Solution Summary

The solution provides a detailed discussion examining what has been and will be the short-run and long-run impact of the Federal fiscal policy that has been followed in the past few years.

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