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Expansionary Fiscal Policy: A Case Study

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Recommended: Causes and consequences of the great depression

Kimberly Wilson
Professor Dalton
April 30th, 2015
A.
As a strict Keynesian, our main slogan is the belief in government intervention, or in other words the government should get involved with the economy. I recommend that when times are bad, the expansionary fiscal policy should be used by the government. The expansionary fiscal policy would allow taxes to be cut or government spending to increase. This would allow the economy to get out of the sticky situation it is in. However, this would cause the debt to go up, since the government would need to borrow the money.
When times are good, I recommend that the contractionary fiscal policy is necessary in order for inflation to be avoided at all cost, as well as keep the economy in line and under wraps. The contractionary fiscal policy would allow the opposite of the expansionary fiscal policy, which would mean taxes would be raised or government spending would be cut back. This would allow the economy to be kept …show more content…

As a person with beliefs in classical economic principles being correct, our main belief is that government intervention was not necessary. I recommend that the economy needs to run its course and it will eventually get resolved on its own. Classical economists believe that people that were capable of working will work and are rational in their decision making. I recommend that the economy should be guided by the invisible hand, which is the foundation of Adam’s Smith’s beliefs.
The reason for supporting this policy is because that I believe that eventually in the long run we will get through this recession just as we did with the Great Depression because the law of supply and demand driving the market will fix the economy. Government intervention will just interfere with the invisible hand and get in the way of things because it is not allowing the economy to correct itself as it would. Without the necessary intervention of the government, people will do what they think is best for his or

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