Blog Post #2
American Recovery and Reinvestment Act of 2009
The President Barack Obama signed the American Recovery and Reinvestment Act of 2009 into law. It is an extraordinary response to a crisis the Great Recession. The Great Recession was the largest downturn since the Great Depression and it was the sharp decline in economic activity officially from December 2007 to June 2009. Due to the consequences of the Great Recession, interest rates dropped and economic activity slowed down, birth rates have dropped, and people delayed having children in the face of the economic troubles. In addition, "as a result of the Great Recession, the United States alone shed more than 7.5 million jobs, causing its unemployment rate to double. Further, American households lost roughly $16 trillion of net worth as a result of the stock market plunge."
The intent of the expansionary policy was to decrease unemployment rate and create or save millions of jobs. In addition, the act is to enhance energy independence, increase financial support for some transportation projects, expand educational opportunities, preserve and improve health care, and provide tax relief. Health Coverage Tax Credit pays 72.5% of qualified health insurance premiums, and more people are eligible.
Theoretically these policies would increase short run aggregate supply. By empowering production, increasing government spending, and lowering taxes, people would have more purchasing power and aggregate demand will increase. However, the effect on aggregate supply in the long run would be different. According to Congressional Budget Office, " the effects of ARRA on output peaked in the first half of 2010 and have diminished, CBO estimates. The effects of ARRA on employment are estimated to lag slightly behind the effects on output; CBO estimates that the employment began to wane at the end of 2010 and continued to do so through 2013." Therefore, the short term impacts of the ARRA were fairly positive and effective. Though, in terms of the long term impacts would harm government and increase in its debt.
The intent of the expansionary policy was to decrease unemployment rate and create or save millions of jobs. In addition, the act is to enhance energy independence, increase financial support for some transportation projects, expand educational opportunities, preserve and improve health care, and provide tax relief. Health Coverage Tax Credit pays 72.5% of qualified health insurance premiums, and more people are eligible.
Theoretically these policies would increase short run aggregate supply. By empowering production, increasing government spending, and lowering taxes, people would have more purchasing power and aggregate demand will increase. However, the effect on aggregate supply in the long run would be different. According to Congressional Budget Office, " the effects of ARRA on output peaked in the first half of 2010 and have diminished, CBO estimates. The effects of ARRA on employment are estimated to lag slightly behind the effects on output; CBO estimates that the employment began to wane at the end of 2010 and continued to do so through 2013." Therefore, the short term impacts of the ARRA were fairly positive and effective. Though, in terms of the long term impacts would harm government and increase in its debt.
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