Recessions corporate profits fall much more quickly

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Recessions: Corporate profits fall much more quickly than wages, consumption or real GDP and vice versa during expansions.
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Other Transfer Payments Recessions: Welfare, Medicaid payments and food stamps↑ These programs are important for 2 reasons. Not only do they alleviate human suffering during bad economic times, but they also help provide human suffering during bad economic times, but they also help provide a floor under spending, which helps keep economic downturns from getting still worse. Discretionary Fiscal Policy The automatic stabilizers, which giving the federal budget into substantial deficits during recessions and tend to push down those deficits during periods of inflation, would appear to be pant of fiscal policy. Since they are built into our economy, one might call them a passive fiscal policy. Since these automatic stabilizers are now taken for granted, we consider fiscal policy to be purely discretionary. Making the automatic Stabilizers more effective Problem: Unemployment benefits – run out in 6 months but recessions can drag on for a year. Solution: Extending the benefit period, increasing the benefit ceiling or a widening of eligibility standards – make stabilizers more effective. THE PUBLIC DEBT The public or national debt is the amount of currently outstanding federal securities that the Treasury has issued. Although about 10% is held by various federal agencies, most notably the Fed, it would be reasonable to say that the public debt is what the federal government owes to the holders of Treasury bills, notes, bonds, and certificates. In 1981, the public debt went over the 1 trillion mark In 1986, the public debt went over the 2 trillion mark In 1989, the public debt went over the 3 trillion mark In 1992, the public debt went over the 4 trillion mark
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In 1996, the public debt went over the 5 trillion mark What is it today? THE FULL-EMPLOYMENT BUDGET, CROWDING-OUT AND CROWDING-IN EFFECTS The concept of the full-employment budget Assume: The economy is at full-employment with a balanced budget Note: unemployment rate↑ just one % to 6% Economists have calculated that tax revenues would and G would ↑ by a total of about 30 billion. Assume: Unemployment rate ↑ to 7% deficit ↑ to 60 billion When the deficit is zero, the budget is balanced. Had the economy been at full employment then, we would have has a balanced budget. In other words, with a 7% unemployment rate and a 60 billion deficit, we would still say that we had a full-employment balanced budget. A deficit of $60 billion when the unemployment rate is 7% would provide the same economic stimulus that a balanced budget would provide when there is full employment. Question: During a recession deficit – would a $60 billion deficit be enough at recessions with unemployment rate of 7%?
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