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Fiscal Policy for Us Recession.

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Explain how fiscal policy can be used to address a recessionary gap and discuss the merits and the consequences of the actual fiscal policy of the current administration. Why republicans are criticizing the current approach? What kind of fiscal policy are they proposing and will it work in light of the US experience? NO it will not.

Democrat:”we can’t cut hour way to prosperity.Republican:”we should not increase taxes on anyone in the middle of a recession”.
Fiscal Policy is described as changing the taxing and spending of the federal government for purposes of expanding or contracting the level of aggregate demand output and employment; these are designed to increase short-run economic growth.
Fiscal policy is used to achieve macroeconomic objectives such as full employment, price level stability and sustained economic growth.
In a recession, an expansionary fiscal policy involves lowering taxes and increasing government spending. By cutting taxes, increasing government spending programs, and increasing transfer payments, more money is in the economy, more income, and more spending. This can be done through the federal budget process; however, the problem with fiscal policy is lag time. This process can take so long (as long as a year or more) that Discretionary Fiscal Policy is very rarely used in the federal government; still, the lag between a change in fiscal policy and its effect on output tends to be shorter than the lag for monetary policy. Instead, the government uses Non-discretionary Fiscal Policy (Automatic Stabilizers). This fiscal policy is built into the structure of federal taxes and spending. Some examples of this are the progressive income tax (the major source of federal revenue) and the welfare systems, which both act to increase AD in recessions.
On the other hand, contractionary fiscal policy is the opposite of expansionary fiscal…...

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