Monday 8 July 2013

 Fiscal Policy : Saving the economy

Fiscal Policy is very UNIQUE. The purpose of this policy is mainly for governments
 attempting to manipulate the level of spending, as well as monitoring and influencing a nation's economy.  Fiscal policy is generally used in different combinations in an attempt to induce a country's economic goals.

An example of usage for this policy is during THE
 GREAT DEPRESSION, an occurrence where the economy throughout the globe was failing. The Great Depression began somewhere around the late 1920’s and lasted throughout the 1930’s. This affected many countries, especially in America. Where people lost their jobs, homes and the ability to provide for their families. In order to counter these occurrences, the American government implemented the Fiscal Policy, where the main intention was to interfere with the nation’s economic affairs.  

One of major causes which led to The Great Depression was the STOCK
 MARKET CRASH IN 1929. The nation’s stockholders lost more than $40 BILLION DOLLARSIt was the first time that the general public, and not just the Wall Street elite, lost large amounts in the stock market.

As a result of this, banks all over the nation started failing. Over 9000
 BANKS started collapsing throughout
 the 1930’s. Bank deposits were uninsured and thus as banks failed, people simply lost their savings

 of the economic situation and concerned for their own survival, stopped being as willing to create new loans. This aggravated the situation even further, leading to less and less expenditures. With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced and as an effect, a reduction in the workforce.

 implementation of Fiscal Policy benefit the dire condition of the American economy at that point of time?

In order to prevent the economy from collapsing any further, the government started doing the OPPOSITE, which is to spend. Manipulating the level of spending,
 the government started engaging in massive workfare programs. The government hired about 60% of the unemployed in public works and conservation projects.

The government also built and renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. As well as, employing about 50,000 teachers, rebuilding the country’s entire rural school system, and hiring around 3,000 writers, musicians, sculptors and painters.

After much seeding, the government managed to improve the REAL GDP GROWTH RATE BY 12% and the NOMINAL GDP GREW AT A 14% RATE. Efforts of economy stimulation proved to be fruitful and a success as the nation was finally brought out of THE GREAT DREPRESSION.

Written by : David Tan Jia Ming ( 0315300 )
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1 comment:

  1. Detailed and informative! Able to understand more on this topic now.