c.s wk 5 disc

What is fiscal policy? What are the tools of fiscal policy? Discuss the impact of expansionary fiscal policy and specifically the fiscal policies used during the Great Recession of 2008-2009 on operation of business operation. Have we seen other significant fiscal policies enacted even more recently than 2008-9?

Submit your initial post by midnight, Day 3. Please respond to two of your classmates’ posts by midnight, Day 7.

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WK5: Wilfredo Mendez

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Wilfredo Mendez posted Feb 3, 2026 10:01 PM

Fiscal policy is the use of government spending and taxation to influence economic activity. It is a major macroeconomic tool used to stabilize the economy, especially during recessions. Fiscal policy is determined by the federal government and works by affecting aggregate demand.

The main tools of fiscal policy are government spending and taxation. Government spending includes investments in infrastructure, education, and social programs, while taxation involves adjusting tax rates or providing tax credits to influence consumer and business behavior. When the economy is weak, the government may use expansionary fiscal policy by increasing spending or cutting taxes to stimulate growth.

Expansionary fiscal policy can positively affect business operations by increasing consumer demand and improving business revenues. As demand rises, firms may increase production, hire more workers, or invest in new capital. Tax reductions and government support programs can also improve cash flow, helping businesses remain stable during economic downturns.

During the Great Recession of 20082009, the U.S. government enacted expansionary fiscal measures such as the American Recovery and Reinvestment Act (ARRA), which included infrastructure spending, tax relief, and aid to state and local governments. These policies helped stabilize demand and reduce business failures. More recently, large-scale fiscal policies were implemented during the COVID-19 pandemic, including stimulus payments and business support programs, which further demonstrate the continued importance of fiscal policy in supporting economic recovery.

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Week 5 – Morgan

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Christian Morgan posted Feb 2, 2026 5:38 AM

Fiscal policy is essentially the governments way of steering the economy by adjusting how much it spends and how much it collects in taxes. Think of it as the federal budget acting as a lever to either speed up or slow down economic growth. The primary tools at their disposal are direct government spending on things like infrastructure, changes to tax rates for individuals and corporations, and transfer payments like social security or unemployment checks. When the economy hits a wall, the government usually turns to expansionary fiscal policy. The goal here is to put more money into the hands of consumers and businesses to jumpstart demand. For a business owner, this usually means seeing more customers at the door or having more cash on hand through tax breaks to keep the lights on and the payroll met. We saw a massive application of this during the Great Recession of 20082009. The American Recovery and Reinvestment Act was a huge deal for businesses because it didn’t just give out tax credits; it funded massive public works projects. This created a trickle-down effect where construction firms, suppliers, and service providers stayed busy while the rest of the market was stalling. It wasn’t a perfect fix, but it provided a floor that prevented many companies from falling into total insolvency. Of course, the most recent and perhaps most aggressive example happened during the COVID-19 pandemic. The scale was much larger than in 2008. Programs like the Paycheck Protection Program were a unique form of fiscal policy because they gave forgivable loans directly to businesses to keep people employed. Combined with the stimulus checks sent to households, it created a massive surge in liquidity that helped businesses survive a period where they were literally forced to close their doors.