Fiscal policy, as we know it today, is meant to mitigate unemployment and stabilize the economy through aggregate demand. Despite dismal unemployment numbers, politicians and policy-makers continue to use and be optimistic about the effectiveness of fiscal policy in this regard. Policy as we have seen over the past five years has had dismal effect on the unemployment numbers we are seeing today. It seems we need a policy that will tackle lagging aggregate demand as well as the employment problems. A direct-job creation effort will work to create the differences in aggregate demand and effective demand creating equilibrium and filling the void that the current Keynesian fiscal policy leaves. Keynesian Ideas The origins of many ideas seen in fiscal policy come from John Maynard Keynes a revolutionary economist who tackled the idea of aggregated demand through Keynesian economics. Aggregate demand is the demand for gross domestic product or goods and services that the country has to offer. It is represented by the formula GDP=AD= C + I + GS+ X or (C) Consumption, (I) Investment, (GS) Government Spending, (X) Net exports. Fiscal policy in essence is using tactics such as government spending and tax cuts in order to affect the right side of this equation and increase aggregate demand. The general agreement across Keynesian theory is that boosting aggregate demand is the precise thing to do when facing an economy with lackluster growth and on the shores of recession. Leading up to most recessions there is a significant reduction in demand for goods and services offered in the country. This lower demand leads to inventory reductions, lower production levels, layoffs and increased unemployment. In order to stabilize the economy, th... ... middle of paper ... ...y/jobless-rate-rose-to-73percent-during-government-shutdown-economy-added-204k-jobs/2013/11/08/f51fa1de-481f-11e3-b6f8-3782ff6cb769_story.html) National Economic Council. 2010, “Jobs and Economic Security For America’s Women.” October. Available at http://www.whitehouse.gov/sites/default/files/Jobs-and-Economic-Security-for-Americas-Women.pdf Plumer, Brad (2013). The U.S. labor force is still shrinking. Here’s why. Retreived from Tcherneva, P. 2011. “Permanent on-the-spot job creation—the missing Keynes Plan for full employment and economic transformation.” Review of Social Economics, forthcoming. Tcherneva, Paulina. 2011. “Fiscal Policy Effectiveness: Lessons from the Great Recession.” Levy Economics Institute of Bard College.
In Keynesianism, government uses fiscal policy, which is a list of policies that government spending and taxing can be used to improve the performance of an economy. The government produces stabilization by taxing and spending yearly plans. Taxing can occur when inflation is high, and lowering taxes tends to occur during a high percentage of unemployment. By lowering taxes, it increases disposable income or the amount of income that goes to financial responsibilities. When people have more money, they are able to spend more, which in return goes into jump starting the economy.
Barsh, Joanna and Yee, Lareina. Unlocking the Full Potential of Women in the US Economy. McKinsey & Company. Accessed April 4, 2014.
Gustman, A. L., Steinmeier, T. L., & Tabatabai, N. (2012). How Did The Recession Of
The trends in unemployment affect three important macroeconomics variables: 1) gross domestic product (GDP), 2) unemployment rate, and 3) the inflation rate.
Every few years, countries experience an economic decline which is commonly referred to as a recession. In recent years the U.S. has been faced with overcoming the most devastating global economic hardships since the Great Depression. This period “a period of declining GDP, accompanied by lower real income and higher unemployment” has been referred to as the Great Recession (McConnell, 2012 p.G-30). This paper will cover the issues which led to the recession, discuss the strategies taken by the Government and Federal Reserve to alleviate the crisis, and look at the future outlook of the U.S. economy. By examining the nation’s economic struggles during this time period (2007-2009), it will conclude that the current macroeconomic situation deals with unemployment, which is a direct result of the recession.
Economist John Maynard Keynes is credited with giving deficit spending academic legitimacy when he published “The General Theory” in 1936, even though many of his ideas were rebranded. Deficit Spending, 2008 The advantages of deficit spending are that it helps curb the unemployment rate during a recession. (Deficit Spending, 2008) While both unemployment rate and government spending are factored into Gross Domestic Product, Keynes also believed that something called “the multiplier effect” which proposes that the return on deficit spending is greater than the cost that it could increase economic output.
Despite the manifestation of Rosie the Riveter propaganda and the continuous push to recruit women, they still were not granted equal pay for their services. This was true in the 1940’s and it’s still a relevant issue today. Then, it was rare for women to earn even slightly more than fifty cents to every man’s dollar. Now, the average woman earns anywhere from sixty to eighty percent of a man’s salary for the exact same job. Ranges vary depending on the specific career field. However, women of minorities remain stuck in injustice systematic trends. The pay rate for a female minority is still approximately fifty percent.
When President John F. Kennedy signed the Equal Pay Act of 1963 into law, he hoped that it would allow working women to finally earn the same amount of money as men; however, more than half a century later, men continue to out earn women in almost every field of work (Lipman para. 4). Male dominated fields tend to pay more than female dominated fields at similar skill levels. In 2012, women earned an average of $691 per week while men earned an average of $854 per week. Furthermore, the majority of women remain unaware that they are earning less than their male colleagues (Hegewisch para. 1). The gender wage gap not only harms a woman’s ability to provide for herself, it also harms many children and families. Women are now the primary caregivers
For several decades, most American women occupied a supportive, home oriented role within society, outside of the workplace. However, as the mid-twentieth century approached a gender role paradigm occurred. The sequence of the departure of men for war, the need to fill employment for a growing economy, a handful of critical legal cases, the Black Civil Rights movement seen and heard around the nation, all greatly influenced and demanded social change for human and women’s rights. This momentous period began a social movement known as feminism and introduced a coin phrase known in and outside of the workplace as the “wage-gap.”
United States. Bureau of Labor. Women in the Labor Force: A Databook. Washington: GPO. 2013. PDF file.
Leonard, Jonathan S. (1989) Women and Affirmative Action The Journal of Economic Perspectives, Vol. 3, No. 1, 61-75.
In time of economic crisis the government has a choice to cut spending or increase spending for public goods and services. “In 2009, Congress passed the American Recovery and Rein- vestment Act, which authorized $787 billion in spending to promote job growth and bolster economic activity”(Stratmann/Okolski 3). John Maynard Keynes, an economist of 20th century, suggest that the government should run a deficit if it will create jobs and increase capital gain. This theory support the current stimulus package that has been introduce during President Obama’s term. Although the flaw with this concept is that it makes the assumption the government has done studies and understands which areas needs the funding the most and knows where it will be beneficial, realistically that is not true. “Federal spending is less likely to stimulate growth when it cannot accurately target the projects where it will be most productive” (Stratmann/Okolski 2). This can be seen because political figures will spend money where it directly supports their needs as well. For instance, the political figure would rather spend money to things that will yield a p...
Fiscal Policy involves the Government changing the levels of Taxation and Government Spending in order to influence AD (Aggregate Demand) and therefore the level of economic activity.
In contrast, the Keynesian Economic Theory was presented in the 1930's, during the Great Depression, by a man named John Maynard Keynes (Classical vs. Keynesian). It relies on spending and aggregate demand which makes this theory demand driven. These economists believe that aggregate demand is influenced by public and private decisions. The public means the government, and the private means individuals and businesses. Aggregate demand sometimes affects production, employment, and inflation. When the economy starts to slack, they rely on the government to build it back up.
These two policies use to try to shorten recessions. Fiscal policy has its initial impact in the goods markets, then monetary policy has its initial impact mainly in the assets markets, which both effect on both level of output and interest rates. (R. Dornbusch et al., 2008)