The Treaty of Versailles to the rise of Nazism in Germany Research Paper

The Treaty of Versailles to the rise of Nazism in Germany - Research Paper Example The allies crafting the treaty at the Paris Peace Conference were more interested in punishing Germany than securing long lasting peace. Ironically, the Treaty of Versailles was intended to make sure Germany was rendered too weak to wage war but due to its restrictive nature served to enrage and embolden factions within the beaten nation which fanned the flames of an emerging fanaticism. Germany not only lost massive amounts of land, economic sanctions caused severe hardships to a people trying to recover from the devastation of war. The worldwide depression in the 1930’s worsened the already desperate situation. In addition, German’s greatly resented foreign troops occupying parts of their country. The German government was weakened as a consequence of the ill conceived Treaty of Versailles which allowed for a fanatical form of fascism led by Adolph Hitler to flourish in Germany following World War I. (Henig, 2010). These issues, which were instigated by the Treaty of Versailles, caused Germany to again become aggressive against its neighboring countries which started WWII. The Treaty of Versailles was designed specifically to weaken Germany in many vital areas. Large sections of German territory were taken away and given to surrounding countries. France and Poland especially received lands that had been important to the Germany economy. Germany also lost all of its worldwide outposts to various allied nations. The new country of Austria was carved from previously held German lands as was the former Czechoslovakia, now called the Czech Republic. The allies were given all of Germany’s mercantile marine ships, another severe blow to the German economy. On top of that, the Treaty required Germany to construct civilian and war ships for selected Allied countries. The Treaty also placed stringent restrictions on the Germany’s capacity to defend itself or to wage war. Germany was not permitted to possess heavy guns, tanks, armored cars, u -boats, Zepplins or airplanes, no air force of any type was allowed. The defeated nation could keep no more than one hundred thousand troops in its army and fifteen thousand sailors in its navy. Germany was forbidden by the Treaty to import materials used for war and was made to pay steep reparations to the Allied nations as well as to the territories it ceded. All types of valuables were seized to make these payments such as precious metals, building materials, vehicles and ships. On top of that cash payments were mandated on an annual basis for years to come. The Treaty also greatly diluted Germany’s transportation system. It gave control of Germany’s railroads to Poland and placed Germany’s river system, an important transportation artery at that time, under foreign management. Poland also gained free use of Germany’s northern ports. (Bell, 1986) Though the Treaty of Versailles accomplished its intended purpose by crippling Germany’s military an d economy ensuring it too weak to wage war, this tactic caused the next great world war just 20 years later. The Allied delegation in Paris assumed they had been successful in both ending the â€Å"war to end all wars† and preventing Germany from ever again waging war against its neighbors in Europe. They were tragically mistaken. The Treaty contained strong language but weak enforcement characteristics. Many military and political leaders understood this from its inception and predicted the horrific consequences. The Treaty was â€Å"the peace to end peace†

Indian religion Essay Example | Topics and Well Written Essays - 250 words

Indian religion - Essay Example Especially the Indian women always try to preserve their practice in a pure Indian traditional way. Indian women have very important role in maintain puja which Hindus name it as Dharma (University of California). In Indian religion Rajput women are famous when it is about regular religious practices especially â€Å"home puja†. Rajput women main objective is to become a good wife, a wife which is protector of her husband, as this is one major religious consideration which Indian women maintain specifically. In Indian religion especially in Hinduism women maintain entail fasting, which is to gain Shiv’s blessing. This is weekly activity which unmarried women perform to attain a holy partner under the blessing of Shiv. This is also maintained by married women to serve their husbands in pious manner. A special fasting is maintained on Monday, which is an important religious day in Hinduism consideration (University of California). University of California. "Religion and Protection." 2004. www.publishing.cdlib.org. 26 September 2012

The role of congress in monitoring events in Iraq Essay Example for Free

The role of congress in monitoring events in Iraq Essay The war against Iraq was perpetrated by the US and the UK with the UN playing passive and reluctant role. The attack has provoked protests all over the globe including in the US and the UK with many groups as well as individual condemning the attack and terming it as unwarranted. Furthermore, the attack was carried out without the approval of the security council. The attack has earned the US more foes than friends especially in the Muslim world. It has also served to fuel animosity against Americas efforts to institute a democratic government in those who view these efforts as interferences in the affairs of the country as a denial of Iraq’s sovereignty . This has led to rebellion against the authorities in Iraq as well as increasing the threat of terrorist attack on America. The Bush presidency and administration seems to believe that the way towards peace is through war and violence especially returning fire with fire. This notion can be at best misguided and at worst catastrophic. It is therefore imperative that the congress recognizes its duty as an organ and act to check any excuses on the part of the government as well as developing solutions that will lead to the reduction of rebellion and consequently the terrorist attacks within Iraq. This section will look at the possible role of congress in ensuring that the tension between Iraq and the US/UK subsides and also allow the US to shed the image of a ‘big bully’ interfering with the affair of a sovereign state. It is worth noting that at this juncture that the congress ahs made some good moves like giving 97 million dollars to support a program pushing for change of regime. This was a step in the right direction, however, this need to be sustained and increased. This organization offers some suggestions for your consideration, ladies and gentlemen. Pursue the Truth. The congress has a responsibility of seeking to reveal the truth so that decisions are based purely on sound intelligence. One of the biggest mistakes that the congress and the media have made was allowing themselves to be fed on misinformation and to act upon that misinformation without making due effort to seek the confirmation of the relevant intelligence agencies. The 2003 invasion on Iraq was based upon unsubstantiated reports that Iraq possessed weapons of mass destruction (WMD). Other reports allegedly justifying the invasion include Saddam-Osama association and that the war was welcome by the Iraqi citizens. The general feeling is that the congress did not do enough to get to the truth of those reports by the Bush administration . With the benefit of hindsight we know that all these reports were false. The congress has an obligation to launch a full congressional inquiry in order to give the American people the truth because America is founded on truth which we believe will set us free . It follows then that the congress needs to be at the forefront of finding facts before endorsing sensitive decisions regarding the events in post Saddam Iraq. Support the Iraq liberation act- when the bill was signed into law by President Bill Clinton, there were some well intentioned proposals that included developing a program that would support a transition to democracy. Even though Saddam Hussein was to be the removed from power without the use of military force, all is not lost and the congress could pursue some of the proposals like financing activities that promote democracy in Iraq. By now it should be clear that the U. S cannot continue having soldiers in Iraq because it is not sustainable. The congress should support those measures aimed at recalling US soldiers out of Iraq and allowing the transition government to run the affairs of Iraq. Right now that sounds dangerous but in the end it will prove less costly than maintaining US soldiers in Iraq. The congress had earlier passed an act to give 97 million dollars for the purpose of supporting regime change. The Act also suggested that those suffering from Saddam’s regime’s brutalities be assisted. Emphasize on empowering the transition government’s capacity to deal with internal insurgence. This can be done through the training of military personnel as well as giving financial support to this government for reconstruction. This is sustainable because only Iraq will be able to fully end the problems it is facing. Much of the terrorist attacks within Iraq are just an extension of a rebellion against the Bush administration. This suggests that the perpetrators of the internal insurgence are still fighting the US by fighting against the US assisted governments. However the reduction of US occupation will shift the focus somehow. Play a more active role in holding the administration accountable. The congress has in the past been accused of being the puppets of President George Bush. A congressman has been named for his role in spreading hearsay that led to the congress’ endorsement of the invasion on Iraq. However the congress is still strategically placed to provide leadership and help check the excesses of the current administration. There are some obviously bad mistakes that the Bush administration has made in the entire affair. However the voice of the congress has not been heard as it should have in efforts to lead the country in the right direction. Now that Saddam is gone and Iraq more than ever requires level headed support which the US can provide, the congress ought to speak on matters regarding the nature of support and the quantity to be given. All in all the congress should be seen playing a more active role in providing checks and balances to the administration. Last but not least is a collective request for all the members of congress to act in accordance to pure conscience. There have been cases in the past especially before the invasion when the congress has been less than active in fulfilling its constitutional role. Instead of initiating a full congressional inquiry, many of the congressmen decided to shut up and not do anything to hold the administration accountable even when they new all was not well. Decisions regarding Iraq’s progress need to be made by exercising discretion and oversight as well. Holding open discussions is what allows for prudent decisions as well as bringing the truth to the surface. As leaders we have a solemn duty to ensure that all future decisions are never again to be based on false impressions. This organization that should the congress abide by the above suggestions, then it can begin to help shape the outcome of what has been an sensitive but costly issue to the whole of America. Thank you.

Small local grocery store: disadvatages in metropolitan area

Small local grocery store: disadvatages in metropolitan area EST1 Task 1 Being a small, local grocery store chain in a major metropolitan area is daunting. National and regional chains are regularly putting out of business small stores owned by local companies. This reason, along with the at large social responsibility taking hold of consumers requires all companies to adjust their organizations from solely a profit-seeking motivation to being socially and ethically understanding in their business outlook. Company Q recently closed two stores in higher-crime-rate areas. Those closures where attributed to the consistently negative balance sheets of those stores. If these stores in higher-crime areas were not making a profit, what is the reason they were losing money? To take a socially responsible approach to all of our store locations will mean understanding our customers. For example, if a store in a predominately-Jewish neighborhood is selling non-kosher items we could expect these items to not be sold in the same volume as kosher items. Taking a Jewish-centric approach to a stores marketing in a Jewish neighborhood makes good business and ethical sense. When we understand our costumers and their communities, we understand that business flourishes where society thrives. Company Q, after many years of customer requests, began to offer a limited selection of health-conscience and organic products in all of their stores. Offering organic and other health-conscience offerings in response to customer demand is a positive step in forming a social contract with our customers instead of merely offering them what we feel they need. Understanding our customers means providing them what they want and what they need. Offering high margin products to customers who have neither the financial ability to afford the higher costs associated with those products, nor have a desire to purchase these products will not help Company Qs bottom line. Product choices must be targeted to the consumer. Ethnic foods must be endemic to the neighborhood their being offered in. Marketing of stores in cultural or racially specific communities must be stocked with products that meet the needs of those people. It takes very little effort to understand our customers, but that little effort can be the difference between a store being successful or failing. Insuring that Company Qs stores differentiate themselves in the marketplace will help give the company a competitive edge in these tough economic times. Company Qs current policy of disposing of day-old products is a perfect example of missing a great public relations and corporate social responsibility opportunity. When asked by the areas food bank to donate product that would otherwise be thrown away, management declined. Employees concerned management over lost revenue through possible fraud and theft instead of donating the food. The first concern with this issue is understanding its costs and actual or perceived benefits. Company Q will write-off any product that needs to be disposed off due to exceeding the expiration date. The products are disposed of in a dumpster and that is the end of the products usefulness in Company Qs current viewpoint. The company, if paying by weight or volume, will incur greater disposal rates from the waste removal company for disposing of the unsellable product instead of donating it to the local food bank. The second concern with not donating product that would otherwise be thrown away is employees attitudes. If weve communicated to our employees that we will not be socially conscience to those people in need in our community, what does that say to our employees since they are also a part of the local community. In our digitally connected society it would be foolhardy to not expect a socially aware employee to film the disposal of food that we may not be able to sell but which could be given away and used by those in need. The potential negative feedback of such an event for a small chain like Company Q cannot be overstated. The above concern dealt with not just the direct financial costs to our company but the possible social capital loss that we find in our current position. Thankfully, Company Q doesnt need to expend much in the way of financial or employee effort to make a considerable difference in our store neighborhood community respect. One delivery van can be used to pick-up the product that would otherwise be thrown away at the end of the workday and transported by the stores supervisor to the local food bank. The food would be unloaded by food bank staff while the Company Q supervisor could discuss with the food bank managers the impact that those donations will have on the community. The marginal time spent loading and travelling to the local food bank is a minor inconvenience for the storeowner at worst and a major public relations benefit for not only the local store but also Company Q in general. We could also expect a reduction in our waste removal services since less product will be thro wn away. â€Å"The point is to attract customers wanting to make a difference in society through their purchasing† (Bronn, 2001, p.2). The intrinsic and extrinsic benefits for not only Company Q management but also storeowners and store employees alike, clearly proves the need for a socially conscience corporate attitude. References Bronn, P.S., Vironi, A.B. (2001). Corporate social responsibility and cause related marketing: an overview. International Journal of Advertising, 2. Retrieved February 27, 2010, from http://www.basisboekmvo.nl/files/cause-related.pdf

Conflict in August Wilsons Fences and How it Affects the Work Essay ex

Fences, by August Wilson, is a drama that focuses on the characteristics of black life in the mid to late twentieth century and the strains of society on African Americans. Set in a small neighborhood of a big city, this play holds much conflict between a father, Troy Maxson, and his two sons, Lyons and Cory. By analyzing the sources of this conflict, one can better appreciate and understand the way the conflict contributes to the meaning of the work. The first conflict in this play develops between Troy and his 34-year old son Lyons. This conflict is introduced when Lyons appears at the house on Troy?s payday to borrow 10 dollars, an occurrence that is common at the Maxson household. Although Troy knows that he will let Lyons have the money, he harasses Lyons over the issue saying, ?...The only time I see this nigger is when he wants something. That?s the only time I see him.? The source of this conflict lies in Troy?s experiences and attitude toward the black cause. Troy is the victim of a generation with limited opportunities in the industrial world and toils everyday to support his family and stay on top of his struggle for survival. Troy has come to believe, from his experiences, that blacks cannot get something for nothing and that life does not owe blacks anything. Due to this, Toy ?fences in? everything that he loves to protect his possessions from the monster of society. Thus there is a symbolization of Troy building a physical fence in the yard but building an emotional fence of protection around his family and friends. He believes that blacks owe it to themselves to make an honest, hard-earned living and that is the only way to survive. Troy states sarcastically that Lyans is blowing his... ... and Rosa will do regarding their relationship. The couple face each other here and admit truths that they have seldom ever talked about and Rosa stands up to Troy realizing that he is imperfect and full of flaws. This conflict jeopardizes Troy and Rosa?s relationship and digs a whole in which they never truly overcome. This conflict emphasizes Troy?s weakness and Rosa?s strength and dignity. In the drama Fences ,by August Wilson, Their is much conflict entangling a black family living in the twentieth century. This conflict involves Troy trying to live his life through his sons, Lyans and Cory, while trying to keep them from making the same mistakes in life that he did. Also, there is conflict including Troy and his young daughter Raynell. By looking at the root of this conflict, one can better grasp the contribution it makes to the drama.

The Life Of Edgar Allen Poe :: essays research papers

The Life of Edgar Allen Poe Edgar Allen Poe, the greatest American teller of mystery and suspense tales in the 19th century was a tormented artist. He struggled to become the accomplished author he is known as today. Poe is now acclaimed as one of America's greatest writers, but in his own unhappy lifetime, he struggled to make ends meet. When he was 17, Poe entered the University of Virginia. Allan, his step father, gave Poe only a small allowance, and the young man soon began owing money. He gambled and ran into greater debt. By the end of the year he owed 2,500 dollars. He was nervous and unstable, and he began to drink. Despite his frequenting liquor, he could never hold it well. He would easily become ill from the alcohol. Allan angrily withdrew Poe from school, and a few months later Poe left home. For the next four years Poe struggled to earn a living as a writer. He returned to Mrs. Clemm's home and submitted stories to magazines. His first success came in 1833, when he entered a short-story contest and won a prize of 50 dollars for the story "MS. Found in a Bottle." By 1835 he was the editor of the Southern Literary Messenger. He married his cousin Virginia, who was only 13, and Mrs. Clemm stayed with the couple. The Poes had no children. This success would not last. Poe's stories, poems, and criticism in the magazine, The Southern Literary Messenger soon attracted attention, and he looked for wider opportunities, not a good choice. From 1837 to 1839 he tried free-lance writing in New York City and Philadelphia but earned very little. Again he tried editing. His work was praised, but he was still paid little. His efforts to organize his own magazine were unsuccessful. For the next two years he turned again to free-lance writing.

Quiz Essay Questions Economics

CHAPTER 12 Fiscal Policy A. Short-Answer, Essays, and Problems 1. Give a brief definition of fiscal policy? What are its economic goals? 2. What is the Council of Economic Advisers? 3. â€Å"The Employment Act of 1946 is no more than a vague and ill-defined commitment by the Federal government to assist in the achievement of full employment. † Do you agree? Explain. 4. Explain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy’s marginal propensity to consume is . 75.By how much is output likely to expand if the economy is operating in the horizontal range of its aggregate supply curve and there are no complications to this fiscal policy? How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion? 5. Explain the effect of a discretionary increase in government spending of $50 billion on the economy when the economy’s marginal propensity to consume is . 75. By how much is output likely to expand if the economy is operating in the horizontal range of its aggregate supply curve and there are no complications to this fiscal policy? . Explain the aspects of expansionary and contractionary fiscal policy. During which phases of the business cycle would each be appropriate? 7. Differentiate between discretionary fiscal policy and nondiscretionary or built-in stabilization policy. 8. Describe two ways the Federal government can finance a deficit and explain which would have the more expansionary effect. 9. Describe two ways the Federal government could retire debt in the event of a budget surplus and explain which would have the most contractionary impact. 10. What is the anti-inflationary or contractionary effect of a budget surplus? 11.Explain how a small budget surplus could actually be somewhat expansionary rather than contractionary. 197 Chapter 12 New 12. Comment on the statement: â€Å"Increasing government spending is preferred to a cut in taxes when the U. S. government seeks to fight a recession. † 13. Explain what is meant by a built-in stabilizer and give two examples. 14. â€Å"The more progressive a tax system, the greater is the economy’s built-in stability. † Explain this statement for both recessionary and peak phases of the business cycle. 15. Explain how the below graph illustrates the built-in stability of a progressive tax structure. 6. In Year 1, the full-employment budget showed a deficit of about $100 billion and the actual budget showed a deficit of $150 billion one year. In Year 2, the full employment budget showed a deficit of about $125 billion and the actual budget showed a deficit of $150 billion. Based on these data, what can be concluded about the direction of fiscal policy? 17. What is the difference between the actual deficit, the full-employment deficit, and the cyclical deficit? 18. What does the â€Å"full-employment budget† measure and of what significance is this co ncept? 19.Complete the table below by stating whether the direction of discretionary fiscal policy was contractionary (C), expansionary (E), or neither (N), given the hypothetical budget data for an economy. 198 Fiscal Policy (2) (3) Actual budget deficit (–) or Full-employment budget Yearsurplus (+)deficit (–) or surplus (+) fiscal policy 1 2 3 4 5 6 – 3. 9% – 4. 5 – 4. 7 – 3. 9 – 2. 9 – 2. 2 – 2. 1% – 2. 6 – 3. 0 – 2. 6 – 2. 0 – 1. 9 (1) (4) Direction of _____ _____ _____ _____ _____ 20. In what fundamental way do the spending-taxation decisions of government differ from the consumption-saving plans of households?Why is this difference significant? New 21. Comment on the statement: â€Å"Discretionary fiscal policy offers an ideal approach to dealing with the nation’s economic problems. It is without problems, criticisms, or complications. † New 22. Explain the six probl ems, criticisms, or complications that arise in the implementation of fiscal policy. New 23. Explain the problems giving rise to this statement: â€Å"You would think the government would want to do something to improve economic conditions when the economy is in trouble, but the government is slow to act. New 24. How do expectations about the future by households and businesses affect the effectiveness of fiscal policy? Cite examples. 25. â€Å"If economic forecasting was a more exact science, the business cycle could be entirely corrected by fiscal measures. † Do you agree? 26. Explain the crowding-out effect. 27. Using the below graph, illustrate the possible impact of a crowding-out effect of a fiscal policy by drawing in the relevant aggregate demand shifts. Label and explain any shifts in the demand curve shown. 199 Chapter 12 28.Explain how the net-export effect would reduce the effectiveness of fiscal policy. New 29. What fiscal policy is most likely to be invoked dur ing a period of recession and high unemployment? A period of rapid inflation? What political, investment, and international problems might the U. S. Congress encounter in enacting these policies and putting them into effect? 30. (Last Word) What is the purpose of the Conference Board’s index of leading economic indicators? 31. (Last Word) Why is the index of leading economic indicators a composite index of ten economic statistics and not just one? 00 Fiscal Policy B. Answers to Short-Answer, Essays, and Problems 1. Give a brief definition of fiscal policy? What are its economic goals? Fiscal policy is the use of the federal budget to achieve full employment, control inflation, and stimulate economic growth. The changes to the federal budget can be made through increases or decreases in government spending or through increases or decreases in tax revenues. [text: E p. 214; MA p. 214]. 2. What is the Council of Economic Advisers?The Council of Economic Advisors is responsible f or assisting and advising the president on economic affairs. One of its principal responsibilities is to prepare an annual report for the president that is submitted to Congress that describes the state of the economy and recommends economic policies to achieve full employment, control inflation, and encourage economic growth. [text: E pp. 214-215; MA pp. 214-215]. 3. â€Å"The Employment Act of 1946 is no more than a vague and ill-defined commitment by the Federal government to assist in the achievement of full employment. Do you agree? Explain. To agree with this statement does not diminish the importance of the Employment Act of 1946. The Constitution has also been called vague and ill-defined, but that does not diminish its importance. This act committed the Federal government to following policies which would attempt to stabilize prices and promote full employment and established the CEA and JEC to assist in this task. While specific policies were not outlined, the intention o f the act is clear it is a responsibility of the Federal government to assist in this effort.That had not been an explicit on-going policy before 1946. [text: E p. 214; MA p. 214] 4. Explain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy’s marginal propensity to consume is . 75. By how much is output likely to expand if the economy is operating in the horizontal range of its aggregate supply curve and there are no complications to this fiscal policy? How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion? If MPC is . 75, the multiplier is 4.A tax cut of $40 billion will result in initial increase in consumption of $30 billion (. 75 ? $40 billion). This initial increase in spending will ultimately result in an increase in consumption spending of $120 billion because of the multiplier process. In contrast, an initial increase in government spending of $40 billion will ultima tely increase consumer spending by $160 billion (4 ? $40) because none of the initial increase is siphoned off as savings as would be the case with a $40 billion tax cut. [text: E pp. 215-216; MA pp. 215-216] 5.Explain the effect of a discretionary increase in government spending of $50 billion on the economy when the economy’s marginal propensity to consume is . 75. By how much is output likely to expand if the economy is operating in the horizontal range of its aggregate supply curve and there are no complications to this fiscal policy? If MPC is . 75, the multiplier is 4. An initial increase of $50 billion government spending will result in a total increase in output of $200 billion. [text: E pp. 215-216; MA pp. 215-216] 6. Explain the aspects of expansionary and contractionary fiscal policy.During which phases of the business cycle would each be appropriate? 201 Chapter 12 Expansionary fiscal policy refers to increases in government spending or decreases in taxes or both, so that the net effect on aggregate demand is an increase in net government spending. Contractionary fiscal policy is the opposite: an increase in taxes or decrease in government spending or both, so that the net effect on aggregate demand is a decrease in net government spending. Expansionary policy would most likely be used during a recession (or trough) phase.A contractionary policy would most likely be employed near the peak of the business cycle as the economy reaches full-employment GDP and the potential for inflation accelerates. [text: E pp. 215-217; MA pp. 215-217] 7. Differentiate between discretionary fiscal policy and nondiscretionary or built-in stabilization policy. Discretionary fiscal policy is the deliberate manipulation of taxes and government spending by the Congress to alter real domestic output and employment, to control inflation, and to stimulate economic growth during a particular period of time.Nondiscretionary fiscal policy, on the other hand, is the chang e in government expenditures or taxes which occurs automatically as a result of existing laws. In particular, personal income taxes have progressive rates and will slow spending and inflation as GDP expands; when GDP declines, taxes will decrease by a more than proportionate amount allowing incomes and spending to decline at a slower rate than GDP. There are also many transfer payment programs which become effective when incomes decline or unemployment occurs to reduce the decline in disposable income.Conversely, these programs automatically are reduced when the economy expands and unemployment declines and spending increases. [text: E pp. 215, 219-220; MA pp. 215, 219-220] 8. Describe two ways the Federal government can finance a deficit and explain which would have the more expansionary effect. The government can borrow money from the private sector in which case it will be competing with private business borrowers for funds. If planned investment spending is â€Å"crowded out,â €  the impact of expansionary deficits will be offset by the decline in investment spending.The government can also finance a deficit by issuing new money which essentially means that the Federal Reserve has financed the deficit. This type of financing would be more expansionary than borrowing from the private sector. [text: E pp. 217-218; MA pp. 217-218] 9. Describe two ways the Federal government could retire debt in the event of a budget surplus and explain which would have the most contractionary impact. The government could use a budget surplus to pay off existing debt which would â€Å"recycle† funds back into the economy and potentially offset the decline in government spending.Alternatively, the government could impound the surplus funds, or allow them to stand idle, which means these funds are not injected into the economy and would have a more contractionary effect than the first alternative. [text: E p. 218; MA p. 218] 10. What is the anti-inflationary or contra ctionary effect of a budget surplus? The anti-inflation effect of a budget surplus depends on what the government does with the surplus. The budget surpluses may be used for debt reduction. In this case, bonds 202 Fiscal Policy are bought back by the government and money is pumped back into the economy.Interest rate will tend to fall, and this may increase consumer and investment spending, thus offsetting some of the contractionary effect of the budget surplus. The government may also impound funds (not spend them). This action will be more contractionary because it actually removes spending from the economy that would have been spent otherwise. [text: E p. 218; MA p. 218] 11. Explain how a small budget surplus could actually be somewhat expansionary rather than contractionary. This could be the unlikely result of what the government decides to do with the surplus.If it is used to retire existing debt, then the surplus is pumped right back into the economy and with the multiplier ef fect this additional liquid wealth in the hands of individuals could lead to an increase in aggregate demand and GDP. [text: E p. 218; MA p. 218] New 12. Comment on the statement: â€Å"Increasing government spending is preferred to a cut in taxes when the U. S. government seeks to fight a recession. † The statement is a normative one. Either action, increased government spending or taxation, can be use to fight a recession. The policy choice will depend on the preferences of the individual.Those individuals who want to fight a recession with an increase in government spending may want to preserve the size of government in the economy and have specific government programs they would like to see funded. Those individuals who prefer a tax cut may want to reduce the size of government and give people more money and the freedom to spend it as they chose. [text: E p. 218; MA p. 218] 13. Explain what is meant by a built-in stabilizer and give two examples. Built-in stabilizers are changes in tax revenues or government spending which occur automatically during different phases of the business cycle.For example, the progressive income tax will dampen any expansion of aggregate demand in the recovery peak phases; and will dampen any decline in income and aggregate demand during a recession as taxes are automatically reduced by a greater proportion than the decline in personal income. There are also government spending programs which increase during recessionary periods automatically as incomes decline or are lost. The so-called â€Å"safety net† programs include unemployment compensation, welfare programs, and food stamp spending.These spending programs are automatically reduced during a recovery peak phase which would dampen aggregate demand and inflationary pressures automatically. [text: E pp. 218-219; MA pp. 218-219] 14. â€Å"The more progressive a tax system, the greater is the economy’s built-in stability. † Explain this statement for both recessionary and peak phases of the business cycle. A progressive tax would take a progressively greater proportion of rising incomes during the peak phase of the business cycle which means it would dampen spending increases and aggregate demand which, in turn, reduces inflationary pressures.On the other hand, a progressive tax would take proportionately less away from declining incomes during a recessionary phase allowing disposable income to fall less rapidly than real GDP. Therefore, aggregate demand would decline less rapidly than GDP and the magnitude of the spending decline that might occur in the absence of the tax would be reduced. [text: E pp. 219-220; MA pp. 219-220] 203 Chapter 12 15. Explain how the below graph illustrates the built-in stability of a progressive tax structure. The graph illustrates how net taxes are negative as GDP declines which will add to aggregate demand.When GDP expands, tax revenues increase which dampens aggregate demand. [text: E pp. 219-22 0; MA pp. 219-220] 16. In Year 1, the full-employment budget showed a deficit of about $100 billion and the actual budget showed a deficit of $150 billion one year. In Year 2, the full employment budget showed a deficit of about $125 billion and the actual budget showed a deficit of $150 billion. Based on these data, what can be concluded about the direction of fiscal policy? Fiscal policy was expansionary because the full-employment budget deficit increased from one year to the next.The actual deficit is composed of the full-employment portion and the cyclical portion. The full-employment portion of the actual budget deficit rose from $100 to $150 billion. The cyclical portion is determined by taking the actual deficit and subtracting the cyclical portion from it. The cyclical portion of the actual deficit fell from $50 billion to $25 billion. The actual budget deficit did not change, but it does not provide a good indication of the direction of fiscal policy. Only the full-employm ent budget tells the direction of fiscal policy. text: E pp. 220-221; MA pp. 220-221] 17. What is the difference between the actual deficit, the full-employment deficit, and the cyclical deficit? The actual budget deficit for any year consists of the full-employment and the cyclical deficit. The full-employment deficit is the difference between government expenditures and tax collections which would occur if there were full employment output. The cyclical deficit is the portion of the actual deficit that arises because the economy is in recession and is produced by this downturn in the business cycle.During a recession, a cyclical deficit often occurs because tax revenues fall as incomes fall and government expenditures increase as more is spent for government transfer payments and other programs. The cyclical deficit occurs because of the operation of these automatic stabilizers. [text: E pp. 221-222; MA pp. 221-222] 18. What does the â€Å"full-employment budget† measure an d of what significance is this concept? The full-employment budget refers to the budget deficit or surplus that would result with existing tax and spending programs if the economy were operating at full-employment.In other words, tax revenues and government spending are estimated at the level that would result if full employment existed. 204 Fiscal Policy Some economists believe that the full-employment budgetary deficit or surplus is what should determine the expansionary or contractionary nature of fiscal policy rather than the actual budgetary deficit or surplus. If the full-employment budget is not in deficit, then expansionary fiscal policy is not being followed according to this view even if the actual budget is in deficit. text: E pp. 221-222; MA pp. 221-222] 19. Complete the table below by stating whether the direction of discretionary fiscal policy was contractionary (C), expansionary (E), or neither (N), given the hypothetical budget data for an economy. (2) (3) Actual bud get deficit (–) or Full-employment budget Yearsurplus (+)deficit (–) or surplus (+) fiscal policy 1 2 3 4 5 6 – 3. 9% – 4. 5 – 4. 7 – 3. 9 – 2. 9 – 2. 2 – 2. 1% – 2. 6 – 3. 0 – 2. 6 – 2. 0 – 1. 9 (1) (4) Direction of E E C C C [text: E pp. 221-222; MA pp. 221-222] 20.In what fundamental way do the spending-taxation decisions of government differ from the consumption-saving plans of households? Why is this difference significant? The spending-taxation decisions of government are made in a political environment in which the majority must be satisfied, or satisfied enough to continue to vote for its elected representatives. Furthermore, since the government does not have a limited lifespan and always has the ability to tax, deficit-spending and debt do not have the same significance to governments that they do to individual households.Households face a much more uncertain future with regar d to their power to raise revenue (income) and therefore must plan their spending and saving to coincide with their lifetime earnings expectations. The difference is significant because so many people try to draw an analogy between government spending policies and household spending plans when it is usually not appropriate to do so. [text: E pp. 223-224; MA pp. 223-224] New 21. Comment on the statement: â€Å"Discretionary fiscal policy offers an ideal approach to dealing with the nation’s economic problems. It is without problems, criticisms, or complications. Discretionary fiscal policy does offer government policymakers potential tools (changing taxes or government spending) to use for stimulating the economy during a recession or for contracting the economy during a period of high inflation. Fiscal policy, however, is not without its problems, criticisms, or complications. First, there are timing problems in getting it implemented at the right time so it will be effectiv e. Second, there are political problems in getting it accepted because it takes time to get the actions passed through Congress and signed by the President.Third, there are expectations problems because policies may be reversed in the future. Fourth, the taxing and spending decisions of the Federal government may be partially offset by the taxing and spending decisions of state and local governments. Fifth, some economists are concerned that expansionary fiscal policy that requires the Federal government to borrow money will raise interest rates and crowd out investment spending, thus reducing 205 Chapter 12 the expansionary effect of the fiscal policy. Sixth, there are complications arising from the connection of the domestic economy to the world economy.Aggregate demand shocks from abroad or a net export effect may increase or decrease the effectiveness of a given fiscal policy. [text: E pp. 223-225; MA pp. 223-225] New 22. Explain the six problems, criticisms, or complications th at arise in the implementation of fiscal policy. First there is a timing problem. Three lags are identified under the â€Å"timing problem† category. There is a lag in recognizing the phase of the business cycle; there is an administrative lag in deciding which policies to follow; there is an operational lag in terms of the impact of the policy once it is implemented.Second, there are political considerations in the adoption of fiscal policy. There is some evidence of a political business cycle where particular expansionary policies are followed in election years whether or not economic conditions merit them. Third, there is an expectations complication. If businesses and households expect that the fiscal policy will be reversed in the future, they may not change their behavior in the way that would be expected if the fiscal policy was permanent.Fourth, the taxing and spending decisions of state and local governments may counteract or reduce the effectiveness of fiscal policy decisions at the federal level. The U. S. government may enact an expansionary fiscal policy by increasing its budget deficit, but state and local governments often have to balance a budget and economic conditions may force them to adopt a contractionary policy that partially offset what the federal government is seeking to achieve.Fifth, there is concern about possible offsetting effects of government borrowing crowding out private spending that would occur in the absence of the government deficit; and an offsetting net export effect which partly counteracts expansionary policy or contractionary policy. Sixth, there are complications to domestic fiscal policy from the national economy’s connection to the world economy. Economic shock from abroad can have an effect on the nation’s imports and exports. The net export effect can reduce the intended effects of fiscal policy. text: E pp. 223-226; MA pp. 223-226] New 23. Explain the problems giving rise to this statement: â€Å"You would think the government would want to do something to improve economic conditions when the economy is in trouble, but the government is slow to act. † Fiscal policy is subject to timing problems. There are three timing lags that limit the speed with which fiscal policy can be enacted and effective. First, there is a lag in recognizing the phase of the business cycle to determine when the government might want to provide help.Second, there is an administrative lag in decision-making that involves deciding which specific policies should be adopted. Third, there is an operational lag because the adoption of policies takes time to have an effect on output and employment. [text: E p. 223; MA p. 223] New 24. How do expectations about the future by households and businesses affect the effectiveness of fiscal policy? Cite examples. If households or businesses expect that the fiscal policy changes are only temporary, they may not change their behavior in the expected way. For example, if tax cuts are enacted to stimulate consumer spending, some consumers may not change their 206 Fiscal Policy spending habits if they think the tax change is only temporary. In the future, they will have to pay more in taxes, so they might increase their saving. Similarly, businesses may not invest in new plants and equipment if they get a tax cut, if they expect taxes in the future to rise or the fiscal policy to be ineffective. [text: E pp. 223-224; MA pp. 223-224] 25. â€Å"If economic forecasting was a more exact science, the business cycle could be entirely corrected by fiscal measures. Do you agree? Exact forecasting, if possible, would still not solve all of the problems encountered in trying to correct the business cycle. There is also the problem of timing the enactment and application of fiscal policy, not to mention the coordination of monetary policy and international economic policies, or reduced private spending (â€Å"crowding out†). [text: E pp. 223-225; MA pp. 223-225] 26. Explain the crowding-out effect. The crowding-out effect is the notion that government borrowing to finance a deficit may crowd out or reduce private borrowing.To the extent that this occurs, the expansionary impact of fiscal policy is reduced because increased demand by the government is partially offset by reduced demand in private investment. [text: E pp. 224-225; MA pp. 224-225] 27. Using the below graph, illustrate the possible impact of a crowding-out effect of a fiscal policy by drawing in the relevant aggregate demand shifts. Label and explain any shifts in the demand curve shown. Expansionary fiscal policy increases demand from AD1 to AD2, but this crowds out some private investment spending that offsets the increase to some extent causing AD2 to decrease to AD3.See graph below. [text: E pp. 224-225; MA pp. 224-225] 28. Explain how the net-export effect would reduce the effectiveness of fiscal policy. 207 Chapter 12 If an expansionary fiscal pol icy brings with it higher interest rates, this could increase the demand for American dollars by foreign investors seeking to earn the higher U. S. returns. This appreciation of the dollar makes U. S. goods and services more expensive to foreigners and foreign imports less expensive to Americans. The net export category of ggregate demand will be reduced which would reduce the impact of expansionary fiscal policy. A contractionary fiscal policy could have the opposite effect causing net exports to increase that again reduces the desired effect of the contractionary fiscal policy. [text: E pp. 225-226; MA pp. 225-226] New 29. What fiscal policy is most likely to be invoked during a period of recession and high unemployment? A period of rapid inflation? What political, investment, and international problems might the U. S. Congress encounter in enacting these policies and putting them into effect?During recession and high unemployment, the government would most likely initiate an expa nsionary fiscal policy. A contractionary fiscal policy would most likely be called for during a period of rapid inflation, especially if it seems to be demand-pull inflation. Several problems are likely to arise in enacting either of these policies. Timing lags in recognition, implementation, and impact are one concern. Another has to do with political realities. A contractionary policy has many unpopular aspects to it because it calls for raising taxes and for cutting government spending.There are also unique problems associated with expansionary policy: crowding out is one potential result that would reduce the expansionary effect of the policy. In both cases, the net-export part of aggregate demand is likely to move in a direction that would tend to offset the policy. [text: E pp. 223-226; MA pp. 223-226] 30. (Last Word) What is the purpose of the Conference Board’s index of leading economic indicators? The index of leading indicators is a monthly index of economic statist ics that are used to forecast the direction of real GDP.Changes in the index provide an indication of the future direction of the economy and are useful to policy makers in developing responses to deteriorating conditions in the economy. The rule of thumb is that three successive decreases or increases in the index indicate a change of direction in the economy. [text: E p. 227; MA p. 227] 31. (Last Word) Why is the index of leading economic indicators a composite index of ten economic statistics and not just one? Each of the economic statistics used to prepare the index may increase or decrease in any month and thus give false or contradictory signals about the direction of the economy.It is less likely that all these economic indicators, taken together, will give as many false signals about the direction of the economy as one indicator will. Thus the composite index is more reliable than any one indicator. The composite index, however, is not infallible and can also give false indi cations about the direction of the economy because of changes in the structure of the economy or developments that are not covered by the indicators that make up the index. [text: E p. 227; MA p. 227] 208