Econ 100B PS #2

Econ 100B PS #2 - very beginning of creating new jobs The...

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Every dollar of government purchases of goods and services generates employment so what the $787 billion in federal stimulus money is spent on doesn’t matter. Since the U.S. economy fell into the current recession, Obama administration has spent $787 billion for federal stimulus package with the prediction that it would increase GDP enough to create million jobs. This package, however, does not help much for current unemployment issues up until now. This package consists mainly of the tax rebates to households and the bailout to many companies in trouble. This spending cannot be seen as government purchases of goods and services because it is a just funding by government like money transfers or stock purchases which produce nothing in economy. This package does not seem to work to generate employment; however, it can be the
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Unformatted text preview: very beginning of creating new jobs. The federal stimulus money helps to reduce the debt of both households and companies even if it did not reduce all debts. The increase of households’ saving helps them to consume in the future. This would help U.S. banks and companies eventually. Many companies, therefore, can afford to increase their investments which lead to generate new jobs. This package cannot be helpful for the short-run, but the long-run. The increase of individuals’ consumption and investments by companies helps fundamentally not just to create new jobs, but also to improve the efficiency of labor which is really important factor for the economy growth....
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This note was uploaded on 02/10/2011 for the course ECON 100B taught by Professor Wood during the Spring '08 term at Berkeley.

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