Macro assignment Example | Topics and Well Written Essays - 750 words - 1

Macro - Assignment Example This is because as the country experienced inflation, the central bank raised interest rates to reduce inflation. High-interest rates reduce consumer spending, thus lowering the AD. Low AD will consequently reduce inflation; however, there is fewer consumers spending which means the real GDP is low. Firms are, therefore, not willing to hire more employees and thus, high rates of unemployment despite the low inflation. President Obamas response to the 2008 recession was the right decision. His government offered stimulus to the falling economy and resuscitate the crumbling housing industry. His policy led to a slow but sure recovery of the economy. Job losses in one industry affect incomes in other industries. For instance, job loss in construction industries means that the population’s income reduces. Therefore, the ability and willingness to buy things like clothes and leisure travels declines, thus affecting the clothing and travel industry. China launched a fiscal stimulus in 2008 so as to boost domestic demand and avoid the booming global recession. Without the stimulus, China would have recorded a growth of between 5 and 6% as opposed to 8-9% growth recorded. Revolutionary war was financed through the deficit debt. Whether the cost of deficit spending is passed on to the future generation is debatable. Economists argue that it is usually borne at the time of debt-financed activity; however, the benefits may persist even to the future generation. Others argue that if deficit spending is spent on consumption goods, the cost is transferable to the future generation Future generation may benefit from deficit spending in different ways. For example, deficit spending could raise economic growth in the future, finance projects such as infrastructure or be used to educate the future generation. Keeping a fraction of money in reserve should not make bankers uncomfortable.