Week Four Reflection
Firstly, the National Debt is passed along from generation to generation which makes it harder and harder to buy basic consumer necessities. As a result, we become a "service based" economy with a dwindling middle class to use those services. Taxes would rise, further disenfranchising the poor, causing our jails to overpopulate. Which puts China in a position to dictate and hold a gun to our heads and threaten to pull the trigger on Washington, D.C. Consumer confidence would be severely injured because this is the engine of our economy. Consumers would worry about the future of the economic stability, holding, rather than spending their money. Only when big debts and deficits begin to show hope of declining will the consumers relax and start spending again. I would establish attainable nation fiscal goals that are ambitious and commit to those goals. “By placing caps on all gov't programs, they ...view middle of the document...
So demands remain uncharged (Ricardian Equivalence , 2014). They do this to help others save money that way when taxes do increase they have enough money to pay the taxes. This helps out with the economy when times start getting worse. The theory suggest that no matter what a government does with its spending the demand will remain unchanged. Here have been a lot of arguments against this theory because of all the unrealistic assumptions. The Richadian theory goes against the other more popular theories that have been provided by the Keynesian economics (Ricardian Equivalence , 2014).
The functional finance model theorizes that the government should base the spending and tax policy changes on their effects on the economy instead of principles that the budget should be balanced. Lerner believed that the aggregate economy is subject to fluctuations which is guided by fiscal policy. Functional finance has drawbacks to its theory and model. The approach is aimed at assuming that financing the deficit will have no offsetting effects on income.
This week, it is important to understand the Federal Reserve and how it works, but it is also important to know how the Federal Reserve affects us. One way is through the deficit. The Federal deficit has become an integral part of society today because it is what the country owes other countries, or our line of credit with other countries. Because we are in debt to other countries, there are certain specific items in our countries that we no longer own or control. Some of these items are iconic landmarks, roads, buildings, lands, or bodies of water that other countries own, which most people do not know of. There are many issues we still face, that are more in-depth and could possibly have a lasting impact on if our economy gets back to the strength it was under President Clinton.
Riddix, M. (2014). How Would You Fix The U.S. Debt Problems? Retrieved from http://www.moneycrashers.com
Ricardian Equivalence . (2014). Retrieved March 12, 2014 , from Investopedia : http://www.investopedia.com/terms/r/ricardianequivalence.asp