1. Like most economists, Ms. Swonk says she does not think the economy will fall back into recession or experience a pronounced rise in unemployment. Instead, economists on Wall Street are looking for the economy to have created 140,000 jobs in April, below average compared with the monthly rate of 168,000 jobs added in the first quarter but better than the 88,000 jobs created in March. The unemployment rate is expected to remain at 7.6 percent.
In the paragraph above, there is a discussion of how fiscal policy is affecting the unemployment rate. Draw an AS/AD diagram and use it to explain the argument in this paragraph. Are the arguments in this article more with short run or long run effects? Why?
2. What would be appropriate fiscal policy to help stabilize our economy? Please evaluate how our economy is doing and why you selected your respective fiscal policy action. What are some of the challenges of using fiscal policy to stabilize our economy?