A political commentator argues: "Congress and the President are more likely to enact an expansionary fiscal policy than a contractionary fiscal policy because expansionary policies are popular and contractionary policies are unpopular". Explain whether you agree or disagree.
Answer: Disagree
It doesn’t depend on popularity but depends on necessity.
Expansionary fiscal policy: This is the policy of government for increasing spending and/or decreasing tax rate to boost up the economy.
Contractionary fiscal policy: This is just opposite of expansionary policy where government decreases spending and/or increases tax rate to minimize inflation.
If the current GDP has declined, the expansionary fiscal policy should be taken by the government. Under this policy the government spends more for economical development. More and more projects will develop, people get jobs, and earnings will increase. Such increase in output leads to increase in aggregate demand.
If the current GDP has expanded, the contractionary fiscal policy should be taken by the government. Under this policy government spends less for regulating economical crisis like inflation. Inflation is the effect of excess money supply in the market—People are having enough money in hand, which increases their demand and it turns into inflation. If the spending is checked, the supply would be in control. The aggregate demand will fall automatically.
The current fiscal policy in the US is expansionary. The country has just overcome the recession phase. Therefore, the economy requires investments in projects for removing unemployment and increasing GDP.
A political commentator argues: "Congress and the President are more likely to enact an expansionary fiscal...
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