Homework Week 12 - Bridget Lawless ECO 201 Week 12 Homework 2 Based on Keynesian theory this business cycle was caused by the government In order to put

Homework Week 12 - Bridget Lawless ECO 201 Week 12 Homework...

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Bridget Lawless 11/23/15 ECO 201 Week 12 Homework 2. Based on Keynesian theory, this business cycle was caused by the government. In order to put the economy back on track, the government should create a fiscal policy, which would either increase spending or sell tax cut. Both stimulus packages will have multiplier effects and increase equilibrium income. To be included the tax cut has to be sales tax or income tax. It has nothing to do with corporate income tax or producers' tax - because it was not suggested by Keynes but the supply-side economists 3. The declining $ has thus far helped to increase AD, as it has made products produced in the US cheaper in the world markets in comparison to products produced overseas. This has increased exports and helped to control growth in imports. The profits of US corporations earned on their overseas operations increase when exchanged back into $. Since the economy had been suffering from weak AD, the AD growth provided by a falling $ has helped the US economic recovery thus far. Foreign investor confidence in $

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