Homework Question on Causes of Unemployment in the U.S
- Read the document then answer the question below:
- According to Paul Krugman, why did the American Recovery and Reinvestment Act (aka, the Stimulus) fail to reduce unemployment in the U.S. more than it did?
- What should the country have done instead.
- This question is worth 3 points. Answers should be about a paragraph long.
Homework Answer on Causes of Unemployment in the U.S
The American Stimulus Act centered on austerity during economic recession. The country went into cutting government-spending costs during slumping period. To Prof. Paul Krugman, this was like causing a double debacle on the already depressed economic sphere. Krugman’s economic belief encircles around ‘austerity at boom age. By this, he meant that government expenditures should and ought to have been reduced when the economy is stable.
Failure to observe this norm caused an unemployment crisis, though the act posted hopes for the opportunities. Another area of failure by the U.S. government is to concentrate on bridging the deficits gap other than creating job opportunities. The common reason for such a step was to cushion the government from excessive use of the ‘little’ monies it had. However, the underlying fact was to increase production, from the available resources, to help mitigate recessing economic balance.
According to the package, government spending on employments boom, is like causing an economic jerk. The act of 2009 introduced tax deductions. This was a late action given that the country’s economic stability had already been affected. On the economic downtrend, Krugman’s economic theory was reluctant to make such move. Similar to the economic postulates by Krugman, is the aspect of reducing federal spending amount. Though the act was reluctant in welcoming this view, it was later proved that this approach carries three major success pillars; basic economics, facts and experience.