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1 The Effectiveness of Fiscal Policy Stimulus in Addressing Economic Crises Your Name University Course Name Professor Date

2 The Effectiveness of Fiscal Policy Stimulus in Addressing Economic Crises The 2008–2009 Great Recession was the most significant economic crisis since the Great Depression. The Federal Reserve Bank of St. Louis (2023) reports that negative statistics, such as a high unemployment rate of 10% in October 2009 and a 4.3% decline in GDP for 2009, defined this economic event. Therefore, it is noteworthy how the United States government adopted expansionary fiscal policies in response to this situation by enacting the American Recovery and Reinvestment Act of 2009 (ARRA). The act was a comprehensive $787 billion stimulus package that included tax cuts and increased government spending to cushion the economy from the effects of the recession. In particular, the ARRA reduced taxes for people and businesses and provided more money for essential sectors such as infrastructure, healthcare, and education. Furthermore, it is crucial to remember that several fiscal policy tools were employed to address the Great Recession's economic issues, as demonstrated by the American Recovery and Reinvestment Act (ARRA) 2009. One of those initiatives was an extension and expansion of the Earned Income Tax Credit (EITC) for low- and middle-income workers, as well as a one-time tax rebate to families for $600 per individual and $1200 per couple (Federal Reserve Bank of St. Louis, 2023). Additionally, businesses enjoyed a temporary reduction in the Social Security payroll tax and increased depreciation deduction to enhance investment and creation of jobs as stimuli. In addition, ARRA provided funds for infrastructure development, education and healthcare and supported particular projects such as the construction of highways and bridges, school renovation, and renewable energy. This meant the fiscal policy stimulus was substantial and compelling because it finally ended the Great Recession and helped avoid a severe economic recession.

3 Finally, the American Recovery and Reinvestment Act (ARRA) was an extremely efficient fiscal policy stimulus. Remarkably, it contributed a lot towards the aggregate demand, which triggered economic growth through the challenging economic period. Furthermore, the ARRA impact was felt in the reduced rise of the unemployment rate through relief that saved vulnerable households from the severity of the economic crisis.

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4 References Federal Reserve Bank of St. Louis. (2023). The Great Recession and its aftermath. Retrieved from https://www.federalreservehistory.org/essays/great-recession-and-its-aftermath Guell, R. C. (2007). Issues in economics today (No. 330 G8.). McGraw-Hill/Irwin.

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