8-2 Discussion- Macroeconomic Debates PDF

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Week 6 discussion for Macroeconomics and the prompt was macroeconomics debates....

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Throughout this course, you have learned about economic models and principles and how they apply to the macroeconomic issues a country faces. Take this time to share what you have learned. In your initial post, choose one of the six debates of macroeconomic policy discussed in the textbook. Explain why this macroeconomic issue is relevant to you. Support your choice with economic concepts you have learned during the course.

Hello class,

All through this course I have learned about economic models and principles and how they apply to the macroeconomic issues’ nations face based on assumptions about human behavior. Macroeconomics basically advises us about the general wellbeing of a nation's economy. I have discovered that macroeconomics primarily centers around issues comparative with national output (estimated by GDP), unemployment, and inflation. A nation's macroeconomic wellbeing is therefore dependent on factors such as a nation’s standard of living, low employment, and low inflation. Macroeconomic policies are created to help and further these factors. Instances of these policies include a monetary policy that affects bank lending and interest rates and fiscal policy which is of relevance to government spending and taxes.

I have most recently learned about the six debates of macroeconomic policy. The debate I decided to go with from the six debates of macroeconomic policy is "Should the government fight recessions with spending hikes rather than tax cuts?". One of the main contributors of a declining economy during a recession is firms that cannot sell their items or services. This leads to the decrease of production and employment; these two decreases will affect the government. One of the first things that the government will do in this situation is reduce the interest rates which increases the money supply. This is done to assist firms in the ability to afford expansions or improvements, thus creating more jobs. Something else that the government will do in this situation is create projects that require spending. The government will do this to establish a climate where there will be more spending which will help stimulate the economy. It is believed by some that going with this alternative will help the economy, instead of simply cutting taxes. One argument to this is that cutting taxes is better than coming out with this type of stimulus package. "At the same time that tax cuts increase aggregate demand, they can also increase aggregate supply. When the government reduces marginal tax rates, workers keep a higher fraction of any income they earn. As a result, the unemployed have a greater incentive to search for jobs, and the employed have a greater incentive to work longer hours. Increased aggregate supply, along with the increased aggregate demand, means that the production of goods and services can expand without putting upward pressure on the rate of inflation." (Mankiw) It is difficult to tell if tax cuts are the better choice or if increasing in spending is the better alternative. As the textbook referenced, you are simply ready to take one run at an arrangement. Comparing two different economic recessions is almost impossible since they occurred at two different times in history and there were different variables that affected both. What worked in 2009 may not work as well in the recession caused by COVID-19.

Personally, I found this to be a fascinating discussion. In the past, I always assumed that tax cuts would always be better than more government spending. I never realized that government spending could possibly help me personally more than tax cuts. My company was considered an essential business, so I was not having issues with paying bills, but the stimulus checks did help me to pay off some previous debt and was a perfect example of government spending. I find it very interesting how it seems that everything in the economy and with macroeconomics is connected. It is very much a balance and relies heavily on cause and effect. When one part of it is affected, it effects the whole economy. When one of those areas gets out of balance it can throw off the entire economy and in the worst case, lead to a recession.

References: Mankiw, N. G. (2021). Principles of Economics (9th ed.). Boston, MA: CENGAGE Learning....