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Expansionary Economic Policy

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Expansionary Economic Policy
Clinton Dullin
Eco203: Principles of Macroeconomics
Evelyn Carlson
9/1/02014

The government in times of economic recession has responsibility to take action, engaging in expansionary economic policies is the action my paper will discuss. The types of economic expansion include Fiscal Policy, and Monetary Policy, the expansion of the two policies allows the government to adjust taxes, and government spending. Harry Truman once quoted “It’s a recession when your neighbor loses his job: it’s a depression when you lose yours.” (The economy perspective, the banker's banker. (1998, Jul 29). When recession hits the first party that is blamed is the government, so there ability to take action is a sign of them taking responsibility. Government action is necessary to right the recession ship, expanding Fiscal, and Monetary Policy may very well be the answer. The first topic of discussion is Expansionary Fiscal Policy and how the government uses the policy to affect the economy. Expansionary Fiscal Policy is a type of policy which includes increase in government purchases, a supple decline in taxes, while making an increase in transfer payments. These changes are designed to close the recessionary gap, while increasing economic stimulus packages and they aim to decrease unemployment. The government will introduce Expansionary Fiscal Policy during anticipation of contractions in the business-cycle. Increase in government spending will increase aggregate demand, and aggregate expenditures. The down side to Expansionary Fiscal Policy leads to budget deficits, and will leave the government with smaller surpluses. The idea of changing taxes and government spending during a recession must be compensated by a surplus during booms. “The goal is to keep tax rates stable and allow the deficit to fluctuate over the cycle. It would be a…...

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