Question

Please provide your value added analysis regarding JFK's fiscal policies to handle the economic troubles he faced. Supply a MACRO S & D graph that supports your analysis paragraph.

The graph is very important and giving me troubles, thank you for your time!

Answer 1

John. F. Kennedy's economic policies were focused on the empowerment of the economy after the US economy recession in 1960s. He made a revolution in the economy. He endorsed deficit spending and also proved that government spending leads to sluggish economy. He increased the minimum wage rate and tried to improve the social security benefits and introduced urban renewal plan. The deficit spending through raising government expenditure ended the recession. In addition to the government spending, JFK cut the tax rates also. The cutting of tax rate enhances the economic growth through large number of job creation. The reducing tax rates attract multinational companies to the economy. At the same time the tax reduction reduce the risk taking. This tax cut increase the disposable income. Government spending enhances several pension plans and transfer payments. This increases the level of welfare among the US people and increase the confidence towards the ruling of JFK. This policy can be explained through macro supply and demand model. Here the supply curve is a vertical straight line with exogenously determined supply. If the government cut the tax rates and increase the government spending, the aggregate demand curve will shift to right. AS P1 POI AD' AD YO Y1 Output There is a shift in aggregate demand curve from AD to AD'. This shift increases the total output, employment and economic growth. The tax cut increase the disposable income among consumers and this enhance the consumers to demand more goods and services. This will tend the producers to implement higher prices on goods and services. Thus the price level rises from PO to P1. The economy stimulate through increasing government expenditure and cutting down tax rates.