A little help please???

Question

Think of the various fiscal policies being inacted by the US Government (the Fiscal Stimulus Package and The Fed Actions). Which do you believe is more beneficial to the US economy and why? What is each attempting to specifically address?

Answer 1

Well, first and foremost we must begin at differentiating between  FISCAL and MONETARY policy.  The recent fiscal stimulus package was an example of fiscal policy.  While any action by the Federal Reserve Board, headed by Ben Bernanke, is monetary policy.  Neither is more beneficial to the economy, everyone argues for one or the other where as the smart economist will look for the perfect blend of both fiscal and monetary policy to send us in the right direction.  Monetary policy can either target the rate of growth of the money supply or interest rates.

Remember, the TREMENDOUS lags that come along with both fiscal and monetary policy.  One of my professors puts it as follows, "It's like throwing a dart at a spinning dart board, underwater."  When the monetary/fiscal policy is implemented  then the dart is thrown, it is slowed down due to a recognition lag, which is the water.  By the time the dart finally reaches the board, the dart board has spun to a completely new spot, which is where the economy currently is when the policy implementation is complete.  As you can see, it takes careful planning and proper indicators to determine when exactly action should be taken.

Answer 2

The Stimulus Package has a main purpose which is not economic, it is political.

By receiving a government check close to the election, people are more likely to re-elect their reps.

The actions of Big Ben are certainly economic, yet political.  His purpose is, in part, to help his side.  One cannot expect anything else.