In late 2008, the United Stated entered a severe recession - by some measures, the most severe recession since the 1930s. In response to the recession, Congress passed and the Obama Administration signed into law the American Recovery and Reinvestment Act of 2009. The act's total cost was $787 billion dollars - $500 billion dollars in increased government spending and $287 billion dollars in decreased taxes.
Write a three to four (3-4) page paper in which you:
- Discuss the expected impact the increased levels of government spending would have on output / GDP, unemployment and inflation in both the short and long run, using the model of aggregate supply, and aggregate demand.
- Compare the impact on GDP, output, and inflation caused by increased spending versus decreased taxes in the American Recovery and Reinvestment Act of 2009.
- Discuss at least two (2) issues and risks to the economy of the increased budget deficit associated with the increased levels of government spending and decreased taxation contained in the act.
- Include three (3) external peer-reviewed sources to support your position.