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Learning Goal: I’m working on a macro economics writing question and need an exp

by | Apr 27, 2022 | Macro Economics | 0 comments

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Learning Goal: I’m working on a macro economics writing question and need an explanation and answer to help me learn.Part 1: Summary this reading:Grading TrumponomicsHow to judge President Trump’s economic recordBefore the pandemic Trumponomics got one thing right and one thing wrongPRESIDENT DONALD TRUMP says Americans should re-elect him because of his record on theeconomy. Before covid-19, America enjoyed its lowest unemployment rate in 50 years, fastannual wage growth of almost 5% among the lowest-paid workers and a buoyant stockmarket.Mr Trump attributes all this to his three-pronged strategy of tax cuts, deregulation andconfrontational trade policy, and says more of the same will revive the economy after thepandemic. Many voters agree. The economy is one issue where Mr Trump does not face a bigdeficit in the polls.Yet his administration’s economic record from before the pandemic is mixed. It got one thingright: when Mr Trump took office the economy was still in need of stimulus, which tax cuts andmore spending helped provide. But that success has also helped conceal the damage done by hisprotectionism.Trumponomics has not achieved what its proponents forecast. While campaigning in 2016 MrTrump predicted economic growth of 4% or more; in office the target was cut to 3%. Betweenthe start of 2017 and the end of 2019 America grew by an annual average of 2.5%, barely fasterthan the 2.4% growth of the three preceding years. The Trump administration argued that taxcuts would pay for themselves and that cutting red tape for business would spur investment. Inreality the budget deficit rose from 4.4% to 6.3% of GDP, on the IMF’S measure, and althoughderegulation did help boost business confidence there was no sustained jump in investmentgrowth.Both regulatory and tax reform have reined in some bad policies, such as tax deductions formortgage interest and state and local taxes. But improvements like this are, relative to the size ofthe economy, small. In the three years to 2019 the administration says that it eliminated $51bn ofregulatory costs, which is only about 0.2% of one year’s GDP and ignores any public benefitsfrom regulation. Most estimates suggest the long-term boost to growth from Mr Trump’s taxreform will be about a tenth of a percentage point per year or less.What was exceptional about America’s pre-pandemic economy was not, therefore, its supplyside, nor even its jobs boom, which was replicated across the rich world. It was that as globaleconomic growth slowed sharply in 2018 and 2019, America’s growth fell only relatively gently.That was because it was temporarily propped up by a bigger budget deficit. Mr Trump can takesome satisfaction from his pump-priming. In 2017 many economists argued that it was a badtime for stimulus because the economy and the labour market had reached their limits; in 2018the Federal Reserve, coming to a similar judgment, raised interest rates four times. It turned outthat there was still plenty of slack. As a result the fiscal splurge caused faster growth than seenelsewhere in the rich world without provoking much inflation. Interest rates came down again,making public debt more affordable.The irony is that a crude stimulus to growth might not have been necessary were it not for MrTrump’s trade war and tariffs, which hurt confidence and weighed on global growth. Before thepandemic the IMF estimated that the fight between America and China might wipe nearly 1% offglobal output. America offset this drag, rather than escaping it altogether. Recent researchsuggests that Mr Trump’s tariffs destroyed more American manufacturing jobs than they created,by making imported parts more expensive and prompting other countries to retaliate by targetingAmerican goods. Manufacturing employment barely grew in 2019. At the same time tariffs arepushing up consumer prices by perhaps 0.5%, enough to reduce average real household incomeby nearly $1,300.Taken together, the various strands of Trumponomics offer three lessons. First, there are bigbenefits to running the economy hot and keeping the job market tight, particularly for poorworkers. Policy should be aimed at restoring these conditions as quickly as possible after thepandemic. If that means running large deficits while interest rates are low, so be it (althoughgiven the parlous state of America’s infrastructure, the money would be better spent on growth-boosting investments than on regressive tax cuts). Second, in already deregulated economiessupply-side reforms may not always show up much in GDP growth. That does not make themundesirable—it is good to eliminate tax breaks—but it does mean politicians should not makewild promises about growth, which is weighed down by immutable forces such as the populationageing. The third lesson is that tariffs are usually a self-defeating way to promote manufacturing,and harm growth and consumers.In 2019 Mr Trump presided over the best labour-market conditions America had seen in severaldecades. He deserves some of the credit. Despite that, he is overselling Trumponomics. It wasboth a help and a hindrance. Part 2: Write 2 paragraph about opinion:According to the graph (Who are the 1%, The Economist, January 21 2012) the 1% richest people in America have received almost 20% of the total income in the last years. Do you agree that they should pay higher taxes? Or instead, do you think it is wrong to charge them with higher taxes because they’ll create less jobs? Do you think that the college should be free and medicare for all as it is in other countries? Or you are opposed to free public services because the government’s deficit will be too high? Or make people lazy?For this discussion, tell the class what you wish for our country in ECONOMICS terms (REMIND this is a macroeconomics class). Include in your arguments the most important macroeconomics variables as: government revenues and expenditures, deficit and national debt , inflation, unemployment, among others . This week’s readings are going to help you to build your ideas and opinions.

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