Assignment 1: Economic Policies and Practices The policies of the federal govern
ID: 1225005 • Letter: A
Question
Assignment 1: Economic Policies and Practices The policies of the federal government influence the outcomes of the various activities in that economy. When government policies change or unplanned events occur, the resulting economic events or activity will usually change.
Listed below are several policies or events that affect the performance of the economy:
1.The federal government employs a budget plan over several fiscal years that results in significant increases in the national debt, with no relief or plans to deal with the problem.
2.The federal government enacts new tariffs and quotas on all imports.
3.The general public loses confidence in their leadership, in terms of their ability to manage the economy, especially in the area of job creation.
4.The federal government, in an effort to stimulate the economy, decreases taxes on all individuals except those earning over $250,000 per year.
5.The level of investment decreases because of a lack of confidence in the economy.
6.Interest rates are kept artificially low by the Federal Reserve for several years.
Required:
For each of the items above, describe what would be the likely outcomes in the economy. Use the appropriate tools of analysis, such as aggregate demand and aggregate supply where appropriate, to justify and explain your answer.
Please help....
Explanation / Answer
We know that federal economy is one of the largest economy in the world. In the recent years their output level is changed very much. Here we discussed the policy of the fed to stabilize the economy. That is,
1.
In this case we find that diffrent things of classical economies. Here the beleief we find that the economy corrected itself. That means we take the famous theorum supply creates its own demand by JB say. Here we made a conclusion that the output of economyy is made by labour and goods consumed by the same. In the short run the the consumption pattern will increased. Also the people are not ready to work in the existing wage rates.
2.
In this policy will affects that increase the import prices and decrease the level of import in the country. This will protected the infant industry in the economy. It increased the sales of US produced goods and increase the public conidence in the economy.
3.
In the general case at the time of crisis the people loss the confidance for the ability of government to create the jobs. Here we can take the words of employment act 1946, it is continuing policy and responsibility of the federal government to promote full employment and production. That means the govnernment will try to reduce the job loss in the economy.
4.
Here we can use the keynesians optimissm and pessimism in the economy. At the time of pessimism the government will decided to lower the level of taxes on the lower income families and individuals. This will affects the aggregate demand supply in the economy. It increases inflation and employment at healthy level.
5.
Here we can see that the level of investment in the economy will decreased. It is because the investors have lack of confidence in the economy. When investment decreases the economy is moving to pessimistic situations, that means the businesses will cut back their investment. When invesment decreases the rate of interest will increases and to attract the investors again.
6.
When the interest rate will keep lower level then people get loans very easily.