American Economy As an Economic Term Paper

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First of all, by increasing governmental spending, the Congress would help boost the economy especially by targeting unemployment and providing, with the new projects on which the government would spend, new working places for individuals. This would in turn pick up consumption and, eventually, bring the country out of recession.

Further more, by decreasing taxes, the U.S. Congress would target both individual households and businesses. In terms of individual households, with lower taxes, people will be more likely to spend, because they would dispose of a greater income. This would increase aggregate demand and bring up consumption, which would in turn stimulate the economy out of recession. The businesses would find more income at their disposal to invest in the development of their businesses and would stimulate them to target new projects as well.

Both measures of fiscal policy would thus have as final goal the increase of aggregate demand, which would in turn increase GDP growth and take the country out of the recession.

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The Federal Reserve did indeed lower its interest rate by 50 basis points to 2-1/2 points on October 2, 2001, after the 9/11 attacks, while the White House announced, on October 11, 2007 that it will keep taxes low to avoid the country entering a potential recession following the mortgage crisis on the market. As we can see, both of these measures are taken a priori in order to counter any potential apparition of an economic recession in the near future, not necessarily because recession exists at that moment (the economic results for the 2nd quarter in 2007 are quite strong, at 3.9%, but the….....

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