Chapter 2.ppt of macroeconomics by mankiw 9th edition
Fiscal policy.docx
1. 1. Discretionary fiscal policy involves alterations to taxation or spending by the government.
Its goal is to alter the economy's size as necessary. Two tools are used in discretionary
fiscal policy. They are the tax code and the budgeting process. The U.S. budget's
discretionary spending is the first instrument. Each year, Congress decides this kind of
spending through appropriations bills. The military budget is the biggest. Discretionary
spending includes all other government agencies as well.
2. The unemployment rate increased by roughly 10 percentage points after the Covid-19
epidemic. At the end of March 2020, the federal government adopted the Coronavirus
Aid, Relief, and Economic Security (CARES) Act in order to support the temporary
layoffs. Through the legislation, the government gave taxpayers up to a $1,200 stimulus
payment, approved delaying payroll taxes, offered $250 billion to extend jobless
benefits, and increased credit access and government support. The Fed has publicly
stated that additional government action is necessary. Jerome Powell, the chairman of
the Federal Reserve, urged the government to adopt an additional stimulus package at
the beginning of October 2020, arguing that the dangers of delivering too much stimulus
are far lower than those of providing insufficient stimulus. The Senate approved
President Biden's $1.9 trillion fiscal stimulus package on February 5 after passing a
number of modifications. It is anticipated that the House will pass this third package,
which will then be reconciled into law.
The proposed package includes $350 billion for states and localities, $90 billion for
small-business grants and loans, $170 billion to help reopen schools and support higher
education institutions, $35 billion for housing assistance, $13 billion for federal nutrition
programs, and expanded and extended emergency paid leave for 106 million people. It
also includes $160 billion for a national vaccination program, expanded testing, a public
health jobs program, and other priorities to combat COVID-19. The Temporary
Assistance for Needy Families (TANF) program will receive $1 billion, while the Health
Resources and Services Administration and the Substance Abuse and Mental Health
Services Administration will each receive $4 billion. Veterans' health services will receive
$20 billion, and $800 million will go to federal programs that safeguard victims of gender-
based violence.