Question

level 4
read the scenario and then answer the question.
in 2008, the u.s. went into a recession. to help, the government passed the economic stimulus act of 2008. this law gave most taxpayers rebate checks of $600 to $1,200. the idea was that people would spend this money on goods and services, which would help businesses and encourage more hiring. the total cost of the stimulus was about $152 billion. while this provided short - term relief, some economists argued the effect of this fiscal policy was limited because many people saved the money or used it to pay down debt instead of spending it. others said the spending boost was enough to prevent an even deeper economic downturn.
based on this scenario, which two statements best critique the effectiveness of the 2008 stimulus?
the contractionary fiscal policy gave short - term relief but raised concerns about big government debt and how efficiently the money was used.
the expansionary fiscal policy guaranteed long - term economic growth without creating debt problems.
the expansionary fiscal policy was less effective because many households saved their rebate instead of spending it.
the contractionary fiscal policy of 2008 successfully lowered inflation and reduced government spending.
the expansionary fiscal policy worked in the short term by encouraging consumer spending and reducing the depth of the recession.

Explanation:

The 2008 Economic Stimulus Act was an expansionary fiscal policy. Some economists criticized its effectiveness because people saved or paid debt instead of spending. Others noted it helped in the short - term by encouraging spending and reducing recession depth. The statements about it being contractionary are incorrect as it involved giving money to taxpayers. Also, it did not guarantee long - term growth without debt problems.

Answer:

• The expansionary fiscal policy was less effective because many households saved their rebate instead of spending it.
• The expansionary fiscal policy worked in the short term by encouraging consumer spending and reducing the depth of the recession.