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Economics - Essay Example

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Instructor Date Macroeconomics Introduction One of the major responsibilities of the government is the expenditure of the country’s funds in a manner that will benefit the society on a number of various levels. Basically, the financial department and related bodies are supposed to spend government money in a way that will ensure maximum profit and minimum loss (Barro)…
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Macroeconomics Introduction One of the major responsibilities of the government is the expenditure of the country’s funds in a manner that will benefit the society on a number of various levels. Basically, the financial department and related bodies are supposed to spend government money in a way that will ensure maximum profit and minimum loss (Barro). The essentialness of this responsibility is due to the connecting factors of a government’s spending habits and the economic stability of the nation in question. If the government is not able to spend money wisely then it will lead to the country undergoing a financial downturn that could affect the quality of living available to individuals in that region in the long run. A number of arguments have sprung up as a result on the best approach that can be taken by the government when it comes to budgeting and expenditure. The financial turmoil that has been experienced by the world in the past such as the Great Depression has led to nations taking their financial stability more seriously (Barro). One of the major standoff points in the argument of how best to utilize government finances and reduce expenses is the issue of the proper time to spend the money that is available to them. The main aim of a nation’s financial strategy is to spend money when it is most profitable thus ensuring a maximum return from the investments that have been put in. At the moment, there are a number of people who state that this is the best time for the government to be increasing their expenditure, while others have taken the opposite path and have contradicted their colleagues thesis by claiming it would be better for the government to undergo a number of budgetary cuts as the country tries to reduce on its expenditure. Government Expenditure Vs Budgetary Cuts There are strong arguments that have been set up by both sides on the reasons why their approach is the best and it can be said that both stances have their advantages as well as their disadvantages. But in order to determine the best approach, it is essential that one understands the main basic points of each argument. The side promoting government expenditure claim that the best time for investment in things like infrastructure and other community projects is now as there is a low interest rate. This means that should the government borrow money to work on its projects now it would be able to pay the money back at a lesser cost than should they choose to do the same later. The argument of budgetary cuts is based on the fact that the global economic stability of the world’s finances is not exactly at its best and thus it is wise for the government to reduce their expenditure through cutting back costs (Barro). This theory argues the best method of improving economic stability is by utilizing the resources that are already there instead of adding more to the fold. Conclusion In conclusion it should be noted that though both sides are correct in a sense, the best approach would be a combination of both mindsets. Since both sides have merit to their arguments then it is fair to say that a collective of these two stances could well provide the answer to sorting out the financial issues that have been troubling the globe of late. References Aki Ito (17th March 2103) “DeLong Says Not Time to Cut U.S. Budget With Free Lunch” Bloomberg 5th November 2013. Web. http://www.bloomberg.com/news/2013-03-13/delong-says-not-time-to-cut-u-s-budget-with-free-lunch.html Barro Robert J. (22nd Jan 2009) “Government Spending Is No Free Lunch “ Wall Street Journal (WSJ) 5th November 2013. Web. http://online.wsj.com/news/articles/SB123258618204604599 Read More
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