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Stimulus Bill

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Question: The US Congress passed a stimulus bill in Feb. 2009. What was the justification for doing so? Given the magnitude of the stimulus amount, do you suppose it has achieved its intended outcomes? Explain you answer.

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Solution Summary

This solution explains the justification of the 2009 stimulus bill and if has achieved its desired outcomes. A detailed explanation with references is provided.

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The stimulus bill that was passed in 2009 was also called the American Recovery and Reinvestment Act of 2009 (ARRA), which is how it is commonly known. This was signed by the current President, Barack Obama. The main point of the bill was to try and bring the economy out of a recession, but in many cases, it actually created a deeper mess than what we previously had. The bill had strong points and weak points, and it was very costly - in the amount of billions of dollars.

One of the main objectives of ARRA was to put money into the economy by using an expansionary policy within ARRA, as one of the components. This was mainly accomplished through federal tax incentives. The line of thinking from an economic standpoint was to put money back into the economy through expansion and increase aggregate demand, which directly affects the aggregate model of the economy. By increasing aggregate demand, we decrease unemployment and increase output and productivity. This is possible because we have increased spending by individuals, mainly through an increased disposable income from the tax incentives that were given to individuals. Examples were refundable tax credits, which put money directly into the taxpayer's pockets to spend. This was also possible through additional tax deductions, which lowered a taxpayer's income tax ...

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