Responsible and rational people only buy what they need and can afford. I believe both theories can be used to the well-being of a nation and per scripture. To ignore the human suffering that was experienced during the depression would have been inhumane. The New Deal used debt to create lasting infrastructure and create segments of the industry that we still have today. When the economy is back on track and unemployment is at acceptable levels, the government needs to then turn its attention to using increased tax revenue to pay down debt rather than creating additional social programs that continue to grow government
The government would tend to relying on borrowing from other foreign country when they faced a budget deficit. The crowding out effect started which would cause a huge burden to the country that is government did not allocate enough money for public goods and services, which will influence the economic growth. The country will have a wider deficit and higher debt pressure. (Ingram, n.d.) In conclusion, should the federal budget always be balanced? To sum up all the points above, I would to say that the federal budget should always be balanced, based on the many advantages that have been discussed above.
Other significant policies during Roosevelt’s New Deal dealing with areas such as federal aid to education, urban development and civil rights include Works Progress Administration, the Civilian Conservation Corps, and the Agricultural Adjustment Administration. These events and policies are another and major milestone in the evolving relationship between intergovernmental entities. As exemplified in the above statements, intergovernmental relations deal heavily in fiscal issues. A dominating force in the relationship between government units is figuring out and answering the questions of how money will be raised, who it will go to, how it will benefit them, and how much should be spent. However, there must be a balance between fiscal and allocations fixation and policy.
The economic version of public interest theory is probably the most well known. It suggests that regulation is a response to imperfections in the market known as market failures. Correction of these failures increases the community’s general welfare and is thus in the public interest. Also those who press for regulation in response to market failures are agents of the public interest. Market failures can be defined by categories of monopoly, externalities and public goods.
. To ensure price stability is maintained the Reserve Bank adjust the OCR which influences prices in the economy. Price stability, which is when the purchasing power of money stays constant, is a desirable outcome of the government because inflation has several negative impacts on household and firms. Inflation erodes the values of households’ savings and causes those on a fixed income to lose purchasing power, the quantity of goods a set amount of money will buy. For firms, inflation causes cost or production to income since workers’ demand pay rises, as well as making it difficult to firms to plan for future.
The fiscal policy is primarily an instrument in the hands of the government whereby it estimates its revenues and expenditures in the economy. This is a very important tool as it would define the flow of money from different sources, indicating the level of activity in the economy. It also defines the broad policies of the government indicating the outwards flow of money in to different sectors of the economy to maintain the overall health of the economy and fulfill its social goals. Apart from the fiscal policy every country has monetary policy at its disposal. This is primarily a tool at the disposal of the central bank of a country which uses different tools to manage the macro economic variables of a country to keep the economy stable or to stabilize it in situations of fluctuations.
There are two main principles when it comes to fiscal policy. One is known as demand-side economics and the other is known as supply-side economics. Demand-side economics comes from John Maynard Keynes, an English economist, he suggested that if the government provided enough work for everyone, it would cause economic growth. This idea was first implemented in Roosevelt’s New Deal through many of the public work programs, and in times of economic crisis the democrats commonly go to demand-side economics in order to get America out of an economic slump. In contrast to demand-side economics, the republicans often refer to the idea of supply-side economics which was developed by the economist Arthur Laffer.
The great debate between a hands off, or laissez faire, and regulated capitalism has been occurring since even before the Industrial Revolution of the late 19th and early 20th Centuries. Major corruptions lean more towards the laissez faire economic policies because there are fewer restrictions. This might be beneficial for them, but for small town companies trying to pay bills and make profits. monopolies are a worrisome thought, especially when the larger companies are wishing to expand put them out of business. Regulated capitalism is a form of hands-on policy with the government including more strict codes for the industry.
His rational expectations theory was developed as a challenge to some of the ideas regarding aggregate demand from classic economist John Maynard Keynes. The theory of rational expectations says that because people are forward-looking and rational (as opposed to emotional), actual outcomes will turn out to be very close to the expectations of all the players in the economy. The theory of rational expectations can be directly applied to the labor market - specifically, what happens to unemployment. The rational expectations theory predicts that, because companies and workers rely not only on past information but also make predictions about the future, the labor market will generally be in equilibrium most of the time, so unemployment is at its natural rate. Rational expectations theory also leads to the conclusion that, although the government can help reduce the unemployment rate, their actions will only lead to higher prices.
In late 18th century, the “invisible hand doctrine” was introduced on order to reduce the role of government. This means, an economic principle, first postulated by Adam Smith, holding that the greatest benefit to a society is brought about by individuals acting freely in a competitive marketplace in the pursuit of their own self-interest. In 19th century, the voice against the government heightened so that role of government in the economy declined dramatically. The “laissez-faire policy/doctrine/policy was evolved against the government intervention. “Government was considered the best which does the least as per laissez-faire.