Answer to Question #317261 in Macroeconomics for chin

Question

Three years later, the job market for the Class of 2003 was rather different. U.S. economic growth had slowed to a crawl, and then to a halt. Companies that had stocked up on recent college grads in the tighter labour markets of 1998-2000 found themselves with more than they knew what to do with in 2002 and 2003. They were not eager to hire more. Bonuses and other “perks” disappeared; job offers became scarcer. With the unemployment rate around 6% in May and June of 2003, the job market was far from the worst ever. But it was nothing like the glory days of 2000.  Show a diagram from that situation.

Answer 1

The two fiscal policies used included lowering taxes and increased government spending. Lowering taxes ensured that more money remained in the economy to pay salaries to prevent a high unemployment rate. Increased government spending ensured that the government spent in the economy, providing the citizens with funds due to buying and selling.

Lower reserve ratio and buying of securities are some of the monetary policies used. Decreasing the reserve ratio meant the government released more funds into the economy to support the high employment rate. Providing funds while buying securities in treasury and bills from the citizens provides more money into the economy. This money then circulates in the economy and is used in paying salaries and wages to prevent a high unemployment rate.