Florida Gateway College Restrictive Fiscal Policy Research Paper
Business Finance
Paper 3 Outline & Rubric
US Fiscal Policy
Congratulations—you have just been elected to be President of the United States!As you know, being the “leader of the free world” entails a lot of responsibility for affairs domestically and internationally—you are the face and executive of the US federal government.Though the US is a mostly market-based economy, the government spending and tax decisions Congress votes on and you sign into law do have somewhat of an impact on the US economy.In your first year as President, you and Congress are faced with some difficult decisions pertaining to expenditures and taxes.
After consulting with Congressional leaders from both parties and consulting with high-ranking members in your own administration, you are faced with two budget policy options during your first year as President:
Option 1—Expansionary Fiscal Policy
- Increase federal government spending by $300 billion for infrastructure.Taxes are not raised.
- No increase in government spending.Increase taxes on businesses and individuals: will raise annual federal income tax revenues by 10% or about $300 billion.
- Explain the pros and cons of each policy
- Explain why you chose the policy you did (Policy 1 or Policy 2) and why the other policy is inferior
- Relate your analysis and justification of the selected policy option to concepts studied in Chapters 33 (AD-AS) and 34 (Fiscal Policy, Monetary Policy, and AD-AS)
- Provide examples, hypothetical or from the real-world, to flesh-out your argument
Option 2—Restrictive Fiscal Policy
To give context to these policy proposals, the day you take office, the US economy looks like this:
Natural Rate of Unemployment: 5.5%
Actual Unemployment Rate (most recent month): 4.0%
Nominal GDP: $20 trillion
National Debt: $20 trillion
Real GDP growth (last 12 months): 2.9%
Average Annual Real GDP growth (last 60 months): 2.5%
Current Annual Budget Surplus/Deficit: $1 trillion
Historical Annual Inflation Rate: 3.2%
Inflation Rate (most recent 12 months): 2.5%
Your Assignment:
Write a short paper about this policy problem and state which fiscal policy you would ultimately propose to the country and to Congress.In the paper be sure to:
