Assignment 1: Economic Policies and Practices The policies of the federal govern
ID: 51591 • 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:
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.
The federal government enacts new tariffs and quotas on all imports.
The general public loses confidence in their leadership, in terms of their ability to manage the economy, especially in the area of job creation.
The federal government, in an effort to stimulate the economy, decreases taxes on all individuals except those earning over $250,000 per year.
The level of investment decreases because of a lack of confidence in the economy.
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.
Explanation / Answer
If national debt is increasing in the economy so government should change their policy by increasing the lending rate which leads to decrease in the debts ultimately leading to the low purchasing power in the hands of the people leading to low demand hence supply will need to regulated. Government imposes new tariff and quotes when they have to regulate the imports that is when import is increasing this directly effects the domestic industries so in order to regulate imports high rate of taxes are imposed leading to low demand of imports and high demands of domestic products and ultimately less supply of imports In order to create employment in the economy various industries should be developed , entrepreneurs should be provided subsidiaries for opening new industries. Low rate of loan should be provided to people which leads to high purchasing power in the hands of the people , leading to more demand which can be fulfilled by increasing the supply and supply can be increased by increasing production ultimately higher job opportunities. When the tax rate decrease people have more cash in their hands , they can utilize their money in various type of investments which increase the per capita income of an individual which further increase national income and GDP of country which stabilizes economy