International Economics Paper

1438 Words Jun 13th, 2016 6 Pages
International Economics Paper

Hercillia C. Henderson

ECO/372

October 21, 2015

Professor Watson Ragin

The Role of the President and Congress in Stimulating and Contracting the Economy

Both the President of the United States and the United States’ Congress are capable of enacting policies that may have the effect of either stimulating or contracting the economy. The President is able to stimulate the economy in a variety of ways. One is to propose a Congressional budget that includes increases in spending for the purpose of creating a stimulus, or proposing tax cuts that likewise are intended to have a stimulus effect. The President may also issue
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The Federal Reserve was created by the federal government in the early twentieth century for the purpose maintaining stability within the framework of the national banking system, and to prevent inflation, unemployment, recessions, depressions, and the economic dislocations associated with the so-called “boom and bust” cycle, or the business cycle (Timberlake, 2008).

The Motivations of Policy-Makers in Stimulating and Contracting the Economy

Policy-makers will likely have multiple goals with regards to the stimulation and contraction of the economy. The primary purpose of economic policy in this regard is the maintenance of economic stability. Many such policies, or at least the institutional framework for the execution of such policies, were created during the early part of the twentieth century in the United States for a variety of reasons. First, the Federal Reserve was created in part to curb the excesses and abuses that accompanied monetary policy during previous times. A major function of the Federal Reserve is to prevent runaway inflation, currency devaluation, and the like, but to also correct for imbalances in the economy that lead to, for instance, the overextension of credit. Likewise, a variety of institutional policy-making frameworks were established during the course of the era of the Great Depression, a time when the stock market had collapsed and unemployment was rampant. In order to correct for the

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