Monday, August 8, 2011

How to Fix the Economy?

The thing is there are two ways that the government can fix the economy. The first of the two is monetary policy. This is when the banks lower interest rates. This takes time to work however. On top of this the interest rates are as low as they can get right now. The other of the two is Fiscal policy. This is when the government uses expansionary fiscal policy to fix the economy. It is fast working, and creates jobs overnight. It creates a multiply effect of the money pumped into the economy. A very good example of this was Obama's bailout plan. Economist measured the size of the recession and said that they needed to spend three times as much as they did to fix the economy. The gov. already being far in debt was not comfortable spending this kind of money. However what they did, including the bailouts had a positive effect on the economy. From what I see in Michigan which was the worst off economics die to the big three failing basically, it has now began to turn around. The car company's have hired a lot of people back to work, and I know Chrysler already payed the government back. Why not spend more money if it is shown to work? Well right now the Democrats want to raise the budget deficit, and the republicans are fighting it, and trying to make the democrats look bad. Its all trying to look good for the republicans. I am not saying just republican do this. When Bush wanted to raise the deficit, Obama voted against it as a Senator.I think a lot of it has to do with the fact that we have political party, and they are fighting each others solutions to fix the economy, just to get re-elected. Economics is a very tricky thing, but from what I have learned/heard, the answers are there, and the two sides will not work together. It is quite a shame when you think about it. Also I dont want people thinking I am Democrat or Republican. Im pretty moderate.

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