Assignment: Debates in Macroeconomics

The Discussion topics deal with the six debates over macroeconomic policy, which include stabilization policy, government spending, monetary policy on rules versus discretion, zero inflation target, balanced budget, public debt, and reforming tax laws.

Respond to two of the following Discussion topics.

Topic 1

There are pros and cons of using monetary and fiscal policy tools to stabilize the economy.

1. Explain the main arguments in favor of economic stabilization during recessions. Explain why policy lags could make stabilization policies counterproductive.

2. What are the justifications given in favor of more government involvement in the market economy? What are the reasons given in favor of less government involvement in the market economy?

Topic 2

One of the widely debated issues in macroeconomic policy is related government budget, which involves government spending and taxes.

1. Should the government always balance its budget? If you think it should, what steps do you suggest that it should take to balance its budget?

2. What is the relationship between budget deficits and national (public) debt? Why has the USA national debt been increasing for decades?