Explanation Of The Fiscal Policy

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PART 1- Explanation of the fiscal policy
The government uses fiscal policy to regulate unemployment because of the negative effect unemployment has on the economy. Unemployment negatively influences the federal government 's ability to generate income and also reduces economic activity. Few people pay taxes when they are unemployed since there are taxes in each paycheck. Also, due to unemployment individual cannot afford to spend their money on unnecessary goods and services. They are very tightfisted in spending money, therefore, they hardly buy gifts, go out to eat, or go shopping at the mall. Thus leading to decreased job growth and overall economic growth since it is more problematic for businesses to expand and make profit. The government
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The Keynesian economic theories recommends government intervention in order to achieve price stability and full employment. The Keynesian economic theories claims that the aggregate demand is produced by households, businesses and government intervention. If the economy is suffering the government may use taxation and spending policies to affect the overall economy. Fiscal policy gives the government the authority to create policies and regulations to protect American families. The three main goals for fiscal policy is to reduce unemployment, control inflation and reassure economic growth. The fiscal policy incorporates the policies that the government pursues in an effort to influence the overall state of the economy through taxation and spending. Additionally, the government can create more jobs to target …show more content…
BusinessToday stated, “The US economic recovery is nonetheless not fast enough to lower the country 's high level of unemployment, the Federal Reserve has warned. The central bank made the comment since it reaffirmed its resolve for continuing to buy $600bn (£380bn) in bonds to stimulate the economy. The Federal Reserve also kept US interest rates on hold at in between 0% and 0.25%, as had been widely expected. In November US unemployment hit to 9.8 percent, its highest level since April. Just 39,000 jobs were created last month, down from 172,000 in October, meaning 15.1 million folks had been devoid of work. The US unemployment rate has now been above 9% for 19 months, the longest stretch on record. Probably the most current data showed that the United States economy grew by an annualized rate of 2.5% between July and September. Nonetheless this isn 't sufficient growth to enable job creation to maintain up with the growing US working age population. The Fed 's latest $600bn stimulus package was announced at the start of November. The central bank had already pumped $1.75tn to the economy because of the recession.” The federal government can try to influence unemployment and increase demand for goods and services directly by spending on government programs. This method for increasing economic growth is very valuable for periods of slow economic growth or even during recessions in order to bring

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