Macroecon Question:
Following the beginning of the Great Recession, the Federal Reserve aggressively cut interest rates and expanded the money supply. Meanwhile, the Federal Government enacted a series of large scale expansionary fiscal programs that included tax cuts and government spending increases. Why hasn't the economy recovered faster?

Question

Macroecon Question:
Following the beginning of the Great Recession, the Federal Reserve aggressively cut interest rates and expanded the money supply. Meanwhile, the Federal Government enacted a series of large scale expansionary fiscal programs that included tax cuts and government spending increases. Why hasn't the economy recovered faster?

anonymous · Answer

Here are three options that you could choose from (explain your answer):

The fiscal response was not large enough given the depth of the recession.
The fiscal response only counteracted the contractionary policy pursued by state and local governments.
There is not a trade-off between inflation and unemployment, so that the expansionary policies could only impact the inflation rate.