Discussion questions Essay Example | Topics and Well Written Essays - 250 words - 1

Discussion questions - Essay Example Given the economic conditions today, I would suggest an expansionary fiscal policy. This is because money in circulation in the market is less, which has discouraged spending, and thus the businesses are performing poorly. An expansionary fiscal policy increases flow of money in the economy, which favours factors of production. This helps increase production, which in turn increases the demand for labour. The rate of unemployment goes down as more people get job opportunities in the job market. The government faces a budget deficit when there is more government spending than the collected revenue. The government should therefore raise taxes, reduce government spending, and sell government bonds and treasury bills as a measure to correct the deficit. Riley claims, â€Å"Higher government borrowings today mean that taxes will have to rise in the future† (Riley web). However, this will reduce the disposable income hence constraining the economy more than expand it. The government should decrease spending as a way of correcting a deficit budget if it seeks for a long-term