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Fiscal Policies during Recession and Economic Boom

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A) Suppose you are in charge of U.S. fiscal policy and the economy is in recession. What would you do?
B) Assume the economy is booming and in danger of "overheating." What would you do?

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Solution Preview

Recession is characterized by slowdown in economic activities for two quarters. Manifestations are hike in cost of mortgages, high interest rates, and dampened consumer demand.

In this situation, these expansionary fiscal policies needed to be applied:
a.) Reducing tax rates for entrepreneurs and individuals will result to more disposable income. Such will allow people to have the resources to encourage them to purchase goods and services.
b.) Increased government spending during recession will create new jobs and will siphon off ...

Solution Summary

This is a 326-word discussion on the appropriate fiscal policies to implement during recession or economic boom.

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