2nd Stimulus

In: Business and Management

Submitted By kreamy
Words 620
Pages 3
Why we need a second stimulus package ?

The concern about debt in this country is mounting by the day as we have more and more government spending in order to get us out of the recession. Do we need to continue that spending in order to prop up the economy and then worry about the debt? You might say no because the country is far too deep with their debt but

The answer is yes and here’s why.

As you cut back expenditure the economy goes down, tax revenue go down, you don’t improve the fiscal position. We tried that experiment over and over again under the IMF tutelage and east Asia , Latin America and each of these cases it was a disaster.
There is an alternative framework which is to stimulate the economy , let the economy grow, get more tax revenue, makes people better off, over the long run its even better if you can direct your spending into investments that give long term economic benefits that give even more tax revenues. We should be focusing on where the national debts will be in 10-15 years from now if we take the money and allocate it to investments our national debt will be lower and our society will be better off.

They Keynesesian multiplier is a good tool that shows how this will work.
An increase in government spending could stimulate a great deal of new production: If your remember the aggregate demand curve in class, this means that when one of the componnts of aggregate demand changes, the final impact on aggregate demand will be greater than the initial impact on that component.
AD = C + I + G + (X-M)
Gvt increases G , spending it on education building new schools, paying computer companies to fit school with computer, or on healthcare build new hospitals, machines, gives doctors, nurses, a payrise, employ more people but that doesn’t stop there. Let’s say you give doctors a payrise those doctors are going to have more money to…...

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