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Discuss some actions taken by the federal government and whether the recession would have been
longer and the unemployment rate higher if the government had not acted by passing the stimulus
package?
In order to get the US out of the 2007 to 2009 recession, newly appointed President Obama had to do
something to get the country back on its feet. This was accomplished by passing a $700 billion bank
bailout known as the Emergency Economic Stabilization Act of 2008 and passed a $787 billion fiscal
stimulus package known as the American Recovery and Reinvestment Act of 2009. The stimulus
included direct spending in infrastructure, education, health, energy, federal tax incentives, and
expansion of unemployment benefits and other social welfare provisions (Amacher & Pate, 2012). The
stimulus allowed the country to get back on enough solid ground to start repairing what had to the
economy over the past two years. I believe that the recession would have lasted longer and there could
have been a possibility that it could have turned into a depression. This would surely make the
unemployment rate to continue to increase. With less money being circulated, there is less opportunity
to improve the economy. Without the increase in the economy, the rate of unemployment is going to
continue to decline.
If left alone, do you believe the economy would have corrected itself as suggested by Classical economic
theory? Explain.
If nothing was done by the government to stop the recession, it time it would right itself once. Classical
economists believed that equilibrium would be reached and maintained at a level consistent with full
employment by the actions of three self-regulating markets (Amacher & Pate, 2012). This theory says
that any economy is able to survive without the help of a government. The most important thing that
helps economies survive is having a balance of supply and demand. When there is a higher amount of
supply, which is when the economy will begin to slip towards a recession. When that happens, a way to
get that balance back is to make it possible for consumers to buy up the large amounts of supply.
Discuss the effect these policies had on increasing the size of the budget deficits and the national debt.
A deficit is the amount by which the federal government’s expenditures exceed its revenues in a given
year. The national debt is the cumulative total of all past budget deficits minus all past surpluses
(Amacher & Pate, 2012). The deficit is forever staying the same or getting worse. The programs that are
in play throughout the country are constantly putting a strain on the economy but there is very little
possible to limit the programs as too many people rely on them. The national debt is a number that
includes everything that country has borrowed in order to maintain the deficit and to maintain this
country. The money for the national debt is money that we borrow from other lenders, many of them
foreign. The effect that these policies have on the deficits and the national debt is it constantly increases
the amount of money that it takes to pay it off.
Reference: Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California:
Bridgepoint Education, Inc.
Some of the actions taken by the government included several stimulus packages. These economic packages wer
Americans had more disposable income, then they would be inclined to spend. The increase in spending would le
the government decided to spend more money on infrastructure improvements such as roads, bridges, and certain
there wasn’t any stimulus package, then the economy would have been much worse.
At first, the stimulus packages did not achieve its goal. Many people took the money and placed in savings accou
during the one of the State of the Union speeches. He urged people to spend the free money on whatever they wa
consumers with financial relief, which in turn would enable them to spend more money. In terms of the deficit, th
government. They did not agree with the concept of going into debt just to get the economy started. However, the
infrastructure.
Travis
Discussion 2
Between 2007 and 2011 the federal budget deficit grew from $160.7 billion to $1,299.6 billion, and the
national debt grew from $8.9 trillion to $14.8 trillion. (Figure 10.1: The ratio of debt to GDP, 19772011.)
In your post, differentiate the budget deficit from the national debt. How do you think the increases
in the budget deficits and the national debt will affect the economy in the future?
"A deficit is the amount by which the federal government's expenditures exceed its revenues in a given
year, national debt is the cumulative total of all past budget deficits minus all past surpluses. It is the am
ount owed to lenders by the federal government" (Amacher & Pate, 2012). No matter what we will
always have them, it doesn't matter how hard we try it will always be
there. The current national debt actually understates the financial obligations of the U.S. government be
cause of other obligations besides debt repayment that could prove costly in the nearfuture.
Because bank failures have been higher than expected throughout the 2000's, these guarantees have be
en a serious drain on the treasury". (Amacher & Pate, 2012). There are no guarantees when it comes to
the economy and the future.
Reference:
Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint
Education, Inc.
This is a comment from the professor...please respond
In reference to your comment: “For instance, in 2007-2008 recessions, the Federal
Reserve used deficits and increased national debt in order to stimulate the economic activity.”
Another occurrence worthy of mention was the stock market downfall during the
same period. Stockholders have the advantage of limited liability if the
corporation were to “go south”. However, we should still perform specific and
comprehensive research when choosing stocks for investment. A classic
example is the losses suffered by ENRON shareholders when the price quickly
plummeted to almost nothing in a quick fashion.
Class: Provide an example of another company that suffered from any similar
time period.