Macroeconomics

Introduction

The great economic depression or recession of 1930s in United States of American saw the country’s efforts to contain the effects of the bad economy extending into the use of various economic policies. Through this, the role of the government was to extend beyond its major activities as the regulator of specific industries and the administration of the state corporation. The state government together with the private sectors joined hands to curtail the economic impacts of the largest economy in the world. The government of United States also has the overall mandate of managing the economic activities and the pace at which they grow, with the motive of trying to maintain high levels of employment and stable of prices in the economy. It does all the above through the use of two main tools i.e. fiscal policies and monetary policies. Fiscal policies are concerned with the determination of the appropriate amounts of taxes to be levied on private businesses and the amount of government spending to be committed in government projects. Monetary policies are concerned with the supply of money in the country.

During the period of recession the state government was forced to intervene and use expansionary policies to boost the rate of economic growth. Much of the efforts from then have been to find the best mix of fiscal and monetary policies that will allow the country to sustain growth and stabilize its prices, (Nations, 2010). The above policies were applied as follows in the economy;

Fiscal policies:

This is one of the tools employed by the federal government of United States to facilitate the growth of the economy during and after the recession person. It involved the use of taxes and government expenditures or spending. As the government expanded, the expenditure of the government also increased. For instance, between 1930 and 1948, the total federal government expenditure had risen more than the federal government’s gross domestic product (Montiel,2011). The control of government spending and taxes is controlled by the central government. The central government uses these controls to stabilize the economy through stabilizing the business cycle, reducing unemployment and inflation in the country. The attention of the fiscal policy is on the demand side of the economy.

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