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International Economics Paper

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International Economics Paper

Hercillia C. Henderson

ECO/372

October 21, 2015

Professor Watson Ragin

The Role of the President and Congress in Stimulating and Contracting the Economy

Both the President of the United States and the United States’ Congress are capable of enacting policies that may have the effect of either stimulating or contracting the economy. The President is able to stimulate the economy in a variety of ways. One is to propose a Congressional budget that includes increases in spending for the purpose of creating a stimulus, or proposing tax cuts that likewise are intended to have a stimulus effect. The President may also issue executive orders in certain areas that have the effect of creating a stimulus or contracting the economy. These might include appointing like-minded people to the Federal Reserve Board, adjusting certain tax rates by means of changes in revenue collection policy, adjustments to trade policy, and the like. Congress possesses similar powers in that Congress may appropriate spending for purposes of a imposing a stimulus package, adjusting rates of taxation for the purpose of generating economic growth, adjusting trade policy, such as lowering tariffs, for a similar purpose, and creating public works programs. Budgets and legislation that are proposed by the President must ultimately be approved by Congress, although the executive branch of the federal government, i.e. the Presidency, possesses considerable discretionary powers with regards to executive orders, and regulatory enforcement.

The Role of the Federal Reserve in Stimulating and Contracting the Economy

The Federal Reserve likewise possesses numerous powers that may have the effect of stimulating or contracting the economy. The Federal Reserve’s primary function is to

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