The Role of Fiscal Policy in the Economy

Click on the links below and Read the articles. You can also use pdf. files with the articles posted in Content - Week 6 - Articles for Discussion week 6 area.

• Fiscal Policy: Economic Effects

https://fas.org/sgp/crs/misc/R45723.pdf

• Fiscal Policy: Taking and Giving Away by Mark Horton and Asmaa El-Ganainy

https://www.imf.org/external/pubs/ft/fandd/basics/fiscpol.htm

In your initial response to the topic you have to answer all questions:

1. Discuss the effect of fiscal policy on interest rates and investment. Explain crowding out effect.
2. Discuss the effect of fiscal policy on inflation.
3. Discuss the effect of persistent fiscal stimulus on the economy in the long run.
4. Describe the mechanism how changes in fiscal policy affect output and prices in the economy.
5. Reflection - the students also should include a paragraph in the initial response in their own words, using macroeconomic terminology, reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace or in everyday life.