Reference no: EM1311515

President Obama pushed his massive fiscal stimulus package of $787 through the Congress and later passed by the House and Senate, whose centerpiece was spending most of this stimulus funds in repairing and building infrastructure in transportation, healthcare, education, science and technology, and education. Obama also wants to make a modest tax cut for middle-income families making a household income less than $250K per year. The push for this combined package of spending and partial tax cut was criticized by several opponents in politics, academia, and businesses on the grounds that the spending was too large under government financing to balance the growing budget deficit and debt that might threaten future stability of the country.

1. Why do you think the critics were so concerned that this stimulus package might be bad economic policy, not just for the US, but for the world economy? Will it have an adverse trickle-down effect on the U.S. and World economy in 2010?

What would happen to the growth rate of the money supply if foreigners lost confidence in the US dollar as a result of recent financial crisis in the U.S. economy, and the Fed was trying nonetheless to maintain its current historic low federal funds rate target?