Adequate Fiscal Policy In The United States

Governments make decisions everyday with hopes of improving and/or maintaining the economy. Every president, dictator, or prime minister has advisors to help him or her make the correct decision every time. An economic advisor for the government must have a thorough understanding of effects decisions will have on the economy. One mistake can worsen recessions to the point of depression or dampen a strong economy. In the United States, every President is graded a success or failure in large part due to the success or failure of the economic strategies employed. Advisors to the government must know how to manipulate aggregate demand, the correct fiscal policy to integrate into action plans, the different strategies used to develop economic …show more content…
An economy is determined to be in a recession with negative economic growth over a relatively short period. It will take time for financial analysts to recognize a recession, and then more time for government officials to determine and approve a course of action. There are two types of fiscal policy at their disposal. These types are expansionary and contractionary. Expansionary fiscal policy incorporates increased government spending and/or decreased taxes with the goal of increasing the GDP. Contractionary fiscal policy involves a decrease in government spending and/or increase taxes with the purpose of shifting the aggregate demand curve to the left(reduction of demand). “When an economy is in a recession, expansionary fiscal policy is in order” (Forsythe, 2012). A government can use this approach to help eliminate the recessionary gap. By increasing government spending, the government will create an increase in demand for goods and services. A reduction in taxes will provide consumers with additional disposable income that can be used for increased consumption or investment. “The actions of this expansionary fiscal policy would result in a shift of the aggregate demand curve to the right, which would result closing the recessionary gap and helping the economy grow” (Forsythe, 2012). In today’s global economy, government intervention in the economy is inevitable from time to time. The proper use of fiscal policy can help officials control the trajectory of the economy. Government officials must be very careful on the determination of when to employ fiscal policy. Each policy, if left in use for too long, can have long-term effects that can be harmful to a country’s well-being. An advisor to a presidential candidate must help him/her develop and economic plan that voters can rally