Fiscal Policy and the Macroeconomy

Examine how fiscal policy is used to mitigate negative impacts on the national economy.
This assessment deals with how the government utilizes fiscal policy
instruments (tools) to stabilize the economy and to achieve full
employment, control inflation, and encourage economic growth.
Suppose the economy of a hypothetical country has reached its
long-run macroeconomic equilibrium when each of the following aggregate
demand shocks occurs.
The economy of a hypothetical country has been stable for two or
three years with very low unemployment. Wages have been gradually
increasing during this time. Now stock market prices begin significant
increases, causing peoples’ investments, such as their retirement
accounts and other investments, to increase in value. People feel very
good about the future and use their new-found wealth to buy things that
they had been hesitant to purchase in the past. Describe, in a short
essay inserted below these questions, how the economic situation will
change and how the government could best respond to these changes.
Include detailed answers to the following questions in your essay:
What kind of economic gap will start to occur (inflationary or recessionary)?
What kind of fiscal policy might be helpful to stabilize the economy (expansionary or contractionary)?
What specific fiscal policy tools does the government have
available, and how should these tools be utilized to maximize their
effect in stabilizing the economy?
What would be the likely impact on the government budget and national debt of the use of these fiscal policy tools?
The economy of a hypothetical country has been stable for two or
three years with very low unemployment. Wages have been gradually
increasing during this time. Now an aggressive policy of increasing
tariffs on foreign goods imported into the country results in
retaliatory actions from the other countries against the hypothetical
country’s products and services. This causes great loss of business in
the hypothetical country, and results in significant unemployment.
Describe, in a short essay inserted below these questions, how the
economic situation will change, and how the government could best
respond to these changes. Include detailed answers to the following
questions in your essay:
What kind of economic gap will start to occur (inflationary or recessionary)?
What kind of fiscal policy might be helpful to stabilize the economy (expansionary or contractionary)?
What specific fiscal policy tools does the government have
available, and how should these tools be utilized to maximize their
effect in stabilizing the economy?
What would be the likely impact on the government budget and national debt of the use of these fiscal policy tools?
Assume that in a hypothetical country, coal mining is a significant
industry, hiring a high proportion of that country’s workforce.
Describe, in a short essay inserted below this question, how a
significant decline in coal mining, as the country attempts to switch to
environmentally safer production, can ripple through the entire
economy, and how the government can use fiscal policy tools to combat
such negative effects.
Minimum Submission Requirements
Proper notification of any resubmission, repurposing, or reworking of prior work per the Purdue Global Student Coursework Resubmission, Repurposing, and Reworking Policy Resource.
This assessment should be completed in this template.
Your paper must be written in Standard English and demonstrate exceptional content, organization, style, grammar, and mechanics.
Your writing should be well ordered, logical, and unified, as well as original and insightful.
You should paraphrase the material and use in-text citations to
justify your discussion. Avoid using quotations. Ensure you are properly
paraphrasing from your sources. For a refresher on paraphrasing, view
this short video on paraphrasing and
explore the additional resources prior to starting your assessment. You
can access tutorials, how-to videos, tutoring services, and more by
visiting the Academic Success Center.
You must include one high-quality source, which can
be your textbook. Additional sources can be current Purdue Global
Library sources. Peer-reviewed academic articles, articles published in
journals, textbooks, and library resources found in the “ProQuest
ABI/Inform Collection” database from the Library are examples of
high-quality resources.
Respond to the questions in a thorough manner, providing specific
examples of concepts, topics, definitions, and other elements asked for
in the questions. Your paper should be highly organized and focused.
Be sure to include references for all sources and cite them using
in-text citations where appropriate. Your sources and content should
follow the current APA citation style. Review the writing resources for
APA formatting and citation found in Academic Tools. Additional writing
resources can be found within the Academic Success Center.
Your paper submission should:
Be in the template provided; and
be free of spelling or punctuation errors.
If the work submitted for this competency assessment does not meet
the minimum submission requirements, it will be returned for revision.
If the work submitted does not meet the minimum submission requirements
by the end of the term, you will receive a failing score.

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