A. What are the problems associated with implementing a macro policy?
The major problem associated with the implementation of a macroeconomic policy is that it is difficult to make such policies sufficient selective to target specific facets of the economy that may require attention. Rather, a macroeconomic policy is comparable to the use of a shot gun where everyone is hit. A second problem with the implementation of a macroeconomic policy is that the length of time required for policy to produce results. In the intervening period, other factors may (probably will) change to an extent that makes it difficult to assess the effectiveness of the implementation.
B. Compare and contrast expansionary and contractionary fiscal policies.
An expansionary fiscal policy is designed to stimulate the economy, and such a policy typically involves increased governmental spending, tax reductions, or both. The idea underlying an expansionary fiscal policy is to increase the increase demand. A concretionary fiscal policy is designed to slow down the economy, and such a policy typically involves decreased governmental spending, tax increases, or both. The idea underlying an expansionary fiscal policy is to increase the decrease demand.
C. Explain the roles of consumption, savings, and investment in the macro economy.
Other factors remaining stable, consumption leads to increased investment and increased employment. Savings provide investment funds for the economy. Investment leads to an increased demand for labor.
D. Evaluate the impact of the budget deficit and the national debt upon investment, inflation, and unemployment.
A budget deficit can result in interest rate increases that would have negative impacts on investment. Conversely, if deficit spending stimulated consumption, investment could be increased. A budget deficit usually sparks inflation when the economy is performing fairly well, but likely will not do so i...