Government Expansionary Fiscal Policy

An economic recession is when spending slows down due to less money and jobs. At a certain point, the government would have to step in and implement expansionary economic policies. One action the government would take would include conducting expansionary fiscal policy, the other, expansionary monetary policy involving the Federal Reserve Bank, both of which effect the money supply, spending, interest rates, aggregate demand, GDP, and employment(Amacher & Pate, 2012). When the government steps in and conducts the expansionary fiscal policy, taxes are cut and government spending increases for positive economic purposes. When the taxes are decreased, the aggregate demand and GDP increase as well. The reasoning behind this is when the taxes

When I first saw that the government spending increased, I was shocked and confused. Unemployment insurance for one requires the spending to grow because there are less jobs, but more need for financial assistance. So the spending goes up to provide funds to the added special programs, as well as the new programs being established. Some programs that may be established is the government creating work, such as repaving roads. It is a job that does not necessarily have to get done at that exact time, but it is done to help put us back to work. The government also tries to invest in troubled industries and companies during a recession to help prevent the business from going

The Fed only works with banks basically, but their job is to set the requirements for all of these banks. Banks must meet a required reserve which is counted by assents with monetary value such as cash and coins, and also what funds the bank has on deposit with its direct reserve bank( Amacher & Pate, 2012). The funds that the bank has in deposit are a requirement for all banks under the Fed. This is to insure that the banks will not have to file bankruptcy and we will not have another great recession. The second of the three tools used by the Federal Reserve Bank is the discount rates, which are actually interest rates charged to a bank. If the interest rate is high, banks will be less prone to borrowing which is typically a sign that the economy needs to slow down on borrowing because there is too much going on at the time. When the discount rate decreases, that is the Federal reserves way of helping to stimulate the economy. By making the interest rates lower for banks to borrow, they are making it easier for us to borrow and take loans for houses, businesses, cars, or even