US "American Recovery and Reinvestment Act"

The US went into what is known as the great recession during the years 2007, 2008, and 2009. To combat the recession the government put an act into place called the American Recovery and Reinvestment Act. A recession occurs when the unemployment rate goes up causes the money supply to go down, and with this drop in money supply it is hard to pay for employment and causes people to be frugal with their money. With the decreased amount of money going into the economy the US put this act in place to reverse this. The act was meant to create increased employment rates and give benefits to those who recently got laid off. By doing this the government was able to lower inflation and increase spending which in turn helped the economy.

The act itself was aimed specifically to help the economy as quickly as possible. To do this the act included methods such as, tax cuts, domestic spending fluctuation, and also including benefits that worked with unemployment and education. The main point of all these implementations of the act was to get more money into the economy. For instance, the tax cuts allowed those who were employed to make more money and the government also increased tax returns giving even more money into the economy. By recycling the money already in the economy, and not producing more currency, this prevented inflation. During the recessions there were many layoffs which left many people unemployed, in addition to the decrease in hiring’s that businesses were making. To help, the government increased their own spending and gave more benefits to those who needed the money. This included giving benefits to those who were unemployed and giving finical aid to students who couldn't afford higher education. This is a highly debated topic today, on how much college costs that is. the reason the government spent money on getting students through college is so that those students could get better jobs coming out of college, these jobs would pay more thus creating more money circulating through the economy. With all of this increased government spending there is a concern that this could hurt the economy in the long run if the government can’t gain back the money it spent during the years following the recession. 

Domestic spending is a very important factor for any economy. Domestic spending is a key factor in a countries RGDP because usually households are not represented in GDP. RGDP is very important to an economy because it is shows how much people are spending. If you look at the aggregate demand curve it will usually show prices dropping and RGDP rising. The act put in place by the government prevented inflation, as said earlier, which means that prices will not increase but rather stay the same or drop, and spending would increase. The increase in spending created a rise in RGDP. With an overall increase in spending and decrease in unemployment the Government was successful in their implementation of the American Recovery and Reinvestment act. 

Bibliography:

Renwick, Danielle. "U.S.- Cuba Relations." Council on Foreign Relations. Council on Foreign Relations, 24 Mar. 2016. Web. 21 Apr. 2016. <http://www.cfr.org/cuba/us-cuba-relations/p11113>