Discussion 5

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Purdue Global University *

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540

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Economics

Date

Nov 24, 2024

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docx

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Uploaded by SharkGirl97

Initial Post: October 23, 2023 Hello Classmates, I cannot believe we are already in the fifth week of the term. It feels like just yesterday we began digesting the ideas behind economics. Though I took a microeconomics class in my undergraduate program as an elective, this is the most thorough class I have taken on economics in some time. I just finished rewatching the seminar recording from this week and I am ready to tackle the prompt questions for this discussion. Below I have pasted the questions posed in bold and my answers below them in a standard typeface. What are the expansionary and contractionary monetary and fiscal policies? What are their policy instruments? How are they used to deal with the inflationary gap and recessionary gap? Which do you think is more appropriate today? After reading Chapters 22-25 of the course text, I have found that expansionary fiscal policies are those that happen during an economic recession. The intent behind them was to design a method for upping aggregate demand which in turn increases the gross domestic products as a whole. In this type of policy, the government is responsible for increases in the purchase of goods and services. During this time it is pertinent, however, that taxation decreases. The intent behind the method is to aid in balancing the economy back to a state of normalcy. On the other hand, contractor fiscal policy requires the decrease of government purchasing of goods and services while simultaneously increasing the taxes being paid. Inflation is one instance in which this occurs. The government's intent behind this is to aid in controlling the economy. In today’s post-pandemic world, I believe it would be more appropriate for the government to enact contractionary fiscal policies due to the inflation of

goods we are experiencing after the distribution of stimulus checks. While we have not experienced a full recession as some have suggested is coming (like the American people once had in 2009), many still believe it is just around the corner. Should the tax laws be reformed to encourage saving? Do you think consumption tax is better than income tax? Not everyone has access to an equal opportunity to save money even though it is beneficial in an equal economy for tax laws to encourage such savings. Due to this inconsistency, implementing a reformation of tax laws in efforts to support savings would only help some of society. Those with a high income and low rate of expenditures would have the ability to save money freely and thus would have the potential to access tax breaks that others are unable to access. Some individuals, however, would not be able to save at all even when given the same opportunity due to their circumstances. One example of this is those with a low income and high expenditures proportionally. This could be expenditures such as taxes or bills. Additionally, this group of individuals would not be able to take advantage of the tax breaks, which would impact them negatively and cause monetary loss. If the tax laws were reformed, the reformation would need to center around income levels and access to the ability to save so all have equal access to utilize tax breaks. If the Fed wants to increase aggregate demand, it can increase the money supply. If it does this, what happens to the interest rate and rate of inflation? Why might the Fed choose not to respond in this way? An increase in money supply would lead to both an increase in inflation rates and interest rates. This could be harmful to customers as they would not have the finances needed to

access goods and services. They would be unobtainable for them due to the prices increasing as inflation rises steadily. Despite this aggregate demand would avoid increasing as consumers would be unwilling to pay for these goods and services due to the pricing. Thank you for reading my post this week! Though I got a late start, I am eager to see any responses I may receive and excited for the conversations to come. I hope you all had a great weekend! Sincerely, Michayla Abrahams References McConnel, C. Brue, S., L. Flynn, S., M. Economics . (23 rd ed.). McGraw Hill Education. Response 1: October 24, 2023 Hello Oumie, I hope you are having a great week! I enjoyed reading your initial post and was drawn to reply by your unique writing style when composing your initial post. You seem to have a casual and personable approach to writing about economics and the federal government that I do not. For me, this class and the ideas about the economy were not easy to understand and did not come naturally. You seem to have an ease around these ideas that I wish I possessed. I could also tell that you are comfortable with the presented topics due to the examples you provided within the text. You touched upon both fiscal policies and discussed methods for increasing demand and considerations for money supply management in different situations. Based upon your

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initial post I did want to pose a question to follow up on your post. I was curious if you had first-hand experience during the 2007-2008 financial crisis. Unfortunately, I was in grade school at the time so I have no personal experience with that crisis and commonly reference the COVID-19 pandemic when referencing economic issues. I was curious if you had a different experience or if you had experienced any of the strife directly. I thought perhaps you had due to your demeanor when discussing the period. Essentially, you seem to have a bit more life experience framed around the economy than I do and I was eager to ask about it! Thank you again for your post this week! I am eager to hear your opinions and see how your experiences may differ from my own. Sincerely, Michayla Abrahams References McConnel, C. Brue, S., L. Flynn, S., M. Economics . (23 rd ed.). McGraw Hill Education. Response 2: October 24, 2023 Hello Tarin, I hope you are having an excellent week as we head into week six. I found your initial post interesting and was drawn to your post. I too reference the events of the COVID-19 pandemic within my initial post and feel like I reference it often within this course as you have here. It dawned on me while writing about the federal economics within the United States that the COVID-19 pandemic and the stimulus checks distributed during the time is the only economic event to happen in my lifetime that has impacted me so personally. In hindsight this is likely due to my age, I am turning 27 this year and began my post-college

career during the summer of 2019 so I was new to supporting myself financially as the pandemic began impacting our economy. I feel like this has shaped my ideas about the economy and my place within it significantly. I was wondering if you had had a similar experience or if you were shaped by different events. I also wanted to pose a question to you based on this line of thinking. I was curious if you had ever considered how others from different countries may have different perspectives on the economy and the government. Perhaps other countries handled the economic decline during the pandemic differently or did not experience economic strife during the pandemic at all due to their government's precautionary measures. I was curious if you had ever thought about these potential differences and how they may shape one’s beliefs. Thank you for your thought-provoking post this week! If you have the opportunity to reply I am eager to hear your thoughts and excited to read the conversations it may spark. Thank you for your time. Sincerely, Michayla Abrahams References McConnel, C. Brue, S., L. Flynn, S., M. Economics . (23 rd ed.). McGraw Hill Education.

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