Purpose Of Assignment This Week Requires The Student 662391

Purpose Of Assignmentthis Week Requires The Student To Address Six Unr

This week requires the student to address six unresolved issues in macroeconomics, each of which is central to current political debates. Students are required to use information and tools that they have accumulated in their study of the text and evaluate both sides of those issues, determine which side they can support for each issue, and defend their positions.

Select two subjects from the following list of topics and prepare a 15-20 slide presentation to present to the class:

• Active monetary and fiscal policy
• Increased government spending to fight recessions
• Reducing federal government's discretionary powers
• Zero-inflation target
• Balanced government budget
• Tax incentives for saving

For each topic, evaluate both the advocates’ position and the critics’ position. Determine which position you support and defend your choice. Support your arguments with a minimum of three peer-reviewed sources, excluding your textbook. Prepare your presentation slides accordingly.

Paper For Above instruction

Macroeconomic policies are central to shaping economic health and stability, yet they often generate polarized opinions among policymakers, economists, and the public. In this paper, I will analyze two critical issues: increased government spending to fight recessions and the implementation of a zero-inflation target. For each issue, I will present the arguments from both supporters and critics, then articulate my position based on the evaluation of available evidence and scholarly consensus.

Increased Government Spending to Fight Recessions

The utilization of increased government spending as a tool to combat recessions is rooted in Keynesian economic theory. Advocates argue that during economic downturns, private sector demand often contracts, leading to higher unemployment and unused capacity. Public expenditure, proponents contend, can stimulate aggregate demand, promote employment, and accelerate economic recovery (Blanchard & Leigh, 2013). For example, during the 2008 financial crisis and the COVID-19 pandemic, increased government spending in many countries was credited with alleviating deep recessions (Bivens & Misra, 2018).

Critics of this approach warn that expansive fiscal policy can lead to long-term fiscal imbalances, increased public debt, and potential inflationary pressures if not carefully managed (Alesina & Perotti, 1995). They argue that excessive reliance on government expenditure can distort economic incentives, crowd out private investment, and place undue burden on future generations due to mounting debt (Rogoff, 2015). Furthermore, critics highlight the risk of policy delays and political interference, which can diminish the effectiveness of fiscal stimulus (Furnas & Miles, 2021).

My position aligns with the advocates under specific conditions. I support increased government spending during severe recessions, especially when private sector demand is insufficient to sustain employment and growth. However, I emphasize the importance of fiscal discipline and targeted spending to mitigate long-term debt concerns. Proper implementation and oversight are essential to realize the short-term benefits without jeopardizing fiscal sustainability.

Zero-Inflation Target

Implementing a zero-inflation target aims to maintain inflation at or near zero, with the goal of providing price stability. Supporters argue that stable prices foster economic certainty, encourage investment, and minimize the erosion of purchasing power (Mankiw, 2016). A zero-inflation environment also simplifies monetary policy implementation by avoiding the complications caused by fluctuating inflation rates (Bernanke & Mishkin, 1997). Countries like Switzerland and Japan have considered or adopted near-zero inflation regimes with some success.

Conversely, critics contend that a strict zero-inflation target can be counterproductive and potentially harmful. They argue that deflation or very low inflation may increase the real burden of debt, discourage consumer spending, and slow economic growth (Fuhrer & Olivei, 2010). Moreover, nominal rigidities in wages and prices make achieving perfect zero inflation challenging without risking deflationary spirals (Carlstrom & Fuerst, 2001). Some economists advocate for a moderate inflation target, typically around 2%, which balances the benefits of price stability with flexibility to respond to economic shocks (Svensson, 2010).

My stance favors a moderate inflation target, close to 2%, rather than strict zero inflation. This approach provides the benefits of stable prices while allowing the central bank some room to maneuver in response to economic fluctuations. It mitigates the risks associated with deflation and accommodates nominal rigidities, fostering a more resilient and flexible economy.

Conclusion

Both issues—fiscal stimulus through increased government spending and inflation targeting strategies—are vital to macroeconomic policymaking. While increased government spending can be beneficial during severe recessions if managed prudently, a rigid zero-inflation target may hinder economic flexibility and growth. Balancing these tools with fiscal discipline and flexible inflation goals can promote sustainable economic stability. Policymakers must consider empirical Evidence and contextual factors when designing economic policies, ensuring they are effective without incurring significant long-term costs.

References

• Alesina, A., & Perotti, R. (1995). Fiscal expansions and adjustments in OECD countries. The Economic Journal, 105(429), 903-917.
• Bernanke, B. S., & Mishkin, F. S. (1997). Inflation Targeting: A New Framework for Conducting Monetary Policy. Journal of Economic Perspectives, 11(2), 97-116.
• Bivens, J., & Misra, J. (2018). The case for robust fiscal stimulus in the post-pandemic economy: Policy implications. Economic Policy Institute.
• Blanchard, O., & Leigh, D. (2013). Growth forecast errors and fiscal multipliers. IMF Working Paper.
• Furnas, J., & Miles, R. (2021). Political economy of fiscal policy delays. Journal of Public Economics, 196, 104417.
• Fuhrer, J. C., & Olivei, G. (2010). Can inflation targeting work in the U.S.? Federal Reserve Bank of Boston.
• Mankiw, N. G. (2016). Principles of Economics (7th ed.). Cengage Learning.
• Rogoff, K. (2015). The curse of cash. The Economic Journal, 125(588), 318-342.
• Svensson, L. E. O. (2010). Inflation targeting: Should the central bank target a higher inflation rate? European Economic Review, 54(4), 441-458.