Discussion on fiscal stimulus package.
President Obama pushed his massive fiscal stimulus package of $787 through the Congress also later passed by the House also Senate, whose center piece was spending most of this stimulus funds in repairing also building infrastructure in transportation, healthcare, education, science also technology also education. Obama also wants to make a modest tax cut for middle-income families making a household income less than $250K per yr. The push for this combined package of spending also partial tax cut was criticized by several opponents in politics, academia also businesses on the grounds which the spending was too large under government financing to balance the growing budget deficit also debt which might threaten future stability of the country.
1. Elucidate why do you think the critics were so concerned which this stimulus package might be bad economic policy, not just for the US, but for the world economy? Will it have an adverse trickle-down effect on the U.S. also World economy in 2010?
2. Illustrate what would happen to the growth rate of the money supply if foreigners lost confidence in the US dollar as a result of recent financial crisis in the U.S. economy also the Fed was trying nonetheless to maintain its current historic low federal funds rate target?