During recession, US government provided stimulus money to people for them to use for anything they wanted.

Question 1
You may have heard it said that it is people’s duty to keep on spending, in order to keep the economy bustling and employment high. In fact, national leaders have been known to insist people to keep on buying things if it looks like the economy might be turning towards a recession. During recession, US government provided stimulus money to people for them to use for anything they wanted.

Question 2
During recession, US government provided stimulus money to people for them to use for anything they wanted.
(i) Why would the government decide to do so?
(ii) Assume that the government dished out about 8 billion dollars as stimulus funds. How can we identify how much of this money will be spent?
(iii) Assume also that only about 25% of 8 billion dollars would be spent. What should the government do?
(iv) If about 75% of the stimulus money is spent on goods and services. How much will this add to the GDP?

Question 3
Disposable income determines the level of consumers’ spending. However, income has nothing to do with the planned investments. If that is the case, then, what determine(s) the level of investments in the economy? How planned investments affect GDP?
Question 4
It is the duty of the government to safeguard stability and prosperity of the country’s economy. However, sometimes, government actions can affect its economy negatively. Explain the pros and the cons of the government actions towards economic growth.
Question 5
US has been experiencing trade deficit over a number of years, meaning that, its imports exceeded its exports. How does this affect its output and employment?

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