Reference no: EM132316888

Discussion: Answer each section below in separate paragraphs.

A.

1. Assume you are in charge of fiscal policy. A slowdown in the economy occurs, and in an effort to try to stimulate the economy via expansionary fiscal policy, you can choose to implement either a reduction in overall taxes or an increase in government spending, but not both. Which one will you implement because you believe it will be the most effective in stimulating the economy? Explain why.

2. Every year the national debt continues to rise as a result of the federal government spending more money than it takes in through taxes. Explain whether you favor or oppose the yearly increase in government spending beyond what it collects in taxes despite its impact on the national debt.

While putting together your response, also keep in mind that if you favor such increases in spending, not only will the debt rise, but price inflation will occur and the pressure to raise taxes will also come into play. On the other hand, if you oppose increases in spending, this likely means cutting some government programs that benefit various people.  

B. For a smaller country that seeks to improve its overall economy and economic standard of living for its people, would you recommend that it accept more foreign investment in the country such as foreign organizations setting up operations in the country, or would you recommend that the smaller country simply accept aid from such entities as the United Nations and the World Bank and avoid foreign investment? The country cannot do both, so choose one or the other and explain why you believe it is the best way to stimulate more growth and improve the standard of living for the smaller country.