Macroeconomic analysis deals with the crucial issue of government involvement in the operation of a “free
market economy.” The Keynesian model suggests that it is the responsibility of the government to help to
stabilize the economy. Stabilization policies (demand-side and supply-side policies) are undertaken by the
federal government to counteract business cycle fluctuations and prevent high rates of unemployment and
inflation. Demand-side policies are government attempts to alter aggregate demand (AD) through using fiscal
(cutting taxes and increasing government spending) or monetary policy (reducing interest rates). To shift the
AD to the right, the government has to increase government spending (the G-component of AD) causing
consumer expenditures (the C-component of AD) to increase. Alternatively, the Federal Reserve could cut
interest rates reducing the cost of borrowing thereby encouraging consumer spending and investment
borrowing. Both policies will lead to an increase in AD.
Develop an essay discussing the fiscal and the monetary policies adopted and implemented by the federal
during the Great Recession and their impacts on the U.S. economy. Complete this essay in a Microsoft Word
document, and in APA format. Note your submission will automatically be submitted through “TurnItIn” for
plagiarism review. Please note that a minimum of 700 words for your essay is required.
Your paper should be structured as follows
- Cover page with a running head
- Introduction: What is the economic meaning of a recession?
· A brief discussion of fiscal policies
· A brief discussion of monetary policies - Conclusions: Discuss the extent to which the use of demand-side policies (fiscal policy and monetary policy)
during the Great Recession of 2008 has been successful in restoring economic growth and reducing
unemployment - References