Economics 5.02 Fiscal Policy with answers

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5.02 FISCAL POLICY Economics For each scenario below, suggest a contractionary or expansionary fiscal policy with specific suggestions regarding congressional action. Directions In a full paragraph, make sure you: ● Identify what the economic situation is (recession or inflation?) ● Explain what type of policy you would recommend (contractionary or expansionary?) ● Suggest how Congress should go about enabling that type of fiscal policy (what types of laws should they pass?) Scenario 1 1. Unemployment is skyrocketing, and consumer confidence is low. Businesses are having to lay off workers and are decreasing investments. GDP has been down for two quarters in a row. This state of the economy is known as a recession, which is defined as a sustained period of real GDP contraction that is usually accompanied by rising unemployment rates. For this economic situation, I would recommend an expansionary policy, because expansionary policy lowers taxes and increases government spending to stimulate the economy and reduce unemployment. Congress should enable the expansionary fiscal policy by giving people access to a budgeting tool that would allow them to allocate more funds. Scenario 2 2. The prices of goods are rising quickly, making money not worth as much as it was. It might get out of control soon. Even though there is almost full employment, people can’t afford everyday items anymore. Inflation, defined as an increase in overall prices within the national economy that leads to higher living expenses and a decrease in the value of money, is the economic situation being described here. Contractionary fiscal policy is what I would advise since it would slow down the economy and control inflation by raising taxes and cutting spending. Congress can raise interest rates or increasing bank reserve requirements in order to facilitate a contractionary fiscal policy.

Rubric ___/60 points Criteria 20 to >15 points 15 to >10 points 10 to >5 points 5 to >0 points 0 points Scenario 1 The answer includes all of the following: An accurate assessment as to what kind of economic situation is described, the appropriate type of fiscal policy for that economic situation, and what that policy would entail in the form of Congressional action. The answer is missing one of the following: An accurate assessment as to what kind of economic situation is described, the appropriate type of fiscal policy for that economic situation, and what that policy would entail in the form of Congressional action. The answer is missing two of the following: An accurate assessment as to what kind of economic situation is described, the appropriate type of fiscal policy for that economic situation, and what that policy would entail in the form of Congressional action. The answer is missing all of the following: An accurate assessment as to what kind of economic situation is described, the appropriate type of fiscal policy for that economic situation, and what that policy would entail in the form of Congressional action. Answer is missing. Scenario 2 The answer includes all of the following: An accurate assessment as to what kind of economic situation is described, the appropriate type of fiscal policy for that economic situation, and what that policy would entail in the form of Congressional action. The answer is missing one of the following: An accurate assessment as to what kind of economic situation is described, the appropriate type of fiscal policy for that economic situation, and what that policy would entail in the form of Congressional action. The answer is missing two of the following: An accurate assessment as to what kind of economic situation is described, the appropriate type of fiscal policy for that economic situation, and what that policy would entail in the form of Congressional action. The answer is missing all of the following: An accurate assessment as to what kind of economic situation is described, the appropriate type of fiscal policy for that economic situation, and what that policy would entail in the form of Congressional action. Answer is missing. Academic Writing The answers are full paragraphs The answers are mostly full The answers are not full Answers are incomplete or Answer is missing . 5.02 FISCAL POLICY | Economics 2

Criteria 20 to >15 points 15 to >10 points 10 to >5 points 5 to >0 points 0 points written using academic language, including correct spelling and grammar. paragraphs written using mostly academic language, including correct spelling and grammar. paragraphs or are not written using academic language, including correct spelling and grammar . are written using inappropriate language for academic work . 5.02 FISCAL POLICY | Economics 3

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