Assignment: STIMULATING THE GDP
After the 9/11 terrorist attacks, President Bush didn't call for sacrifice, he called for shopping. Saying we could "shore up our losses by shopping" and to stimulate the economy by spending our stimulus payments. The media quoted academic and corporate economists assuring us that this response to the attacks would help bring an end to the recession. Is that good economics?
The primary determinant of the standard of living for the residents of a country is the ability of that country to produce goods and services. Gross Domestic Product (GDP), as a measure of the total production of an economy, provides us with a country's economic report card. The more production there is, the larger the GDP. There is a tendency to interpret a rise in the GDP with an increase in prosperity.
GDP and Standard of Living
World War II is regularly credited for bringing us out of the Great Depression, but does war really stimulate an economy? Should we destroy in order to create a boom in the economy? This thinking is wrong, but why? What is really happening? What will stimulate the economy in a real and more permanent way?
Given what you know from the Chapter readings and the class, submit an essay addressing this issue in the context of the GDP. What is it about how the GDP is calculated that makes us think destruction can increase the GDP? That spending after the 9/11 terrorist attacks can stimulate the economy? How does F. Bastiat's broken window fallacy reveal the error of this thinking?
Your essay should be 300 to 500 words, 1" margins, double spaced. Please include your name, the date, and the name of the class in a header. Have fun, be creative, think a bit out of the box, and always cite your sources.