Reagan Plan

Topics: Macroeconomics, Economy, Economics Pages: 2 (469 words) Published: January 27, 2013
1. Compare the nature and severity of the problems facing President Reagan when he takes office in January 1981 with those faced by Kennedy. What factors contributed to these problems?
I consider the most crucial factor as too much government step-in. We should let the free market mechanism automatically correct the problems. Just as what he said at his inauguration day, "Government is not the solution to the problem, the government itself is the problem."

2. What were the key elements of the Reagan economic strategy? What is the role of monetary policy in the Reagan plan? I think the key elements of Reagan economic strategy is that the initial economic policy package can not only includes the tax cuts, but also should include things that will generate inflation such as outlay control and future budget authority reduction.

The role of monetary policy in the Reagan plan is to maintaining the value of the currency, to restore credit, capital market order and equilibrium, to keep both inflation and interest rates down and to restore vigor to our financial institutions and markets.

3. What assumptions – economic, social, political, and international -- underlie Reaganomics? a. By 1985, our real production of goods and services will grow by 20 percent and will be $300 billion higher than today. b. The average worker’s wage will rise by 8 percent.

c. In fiscal year 1982, business would acquire nearly $10 billion for investment and by 1985 the figure would be nearly $45 billion. d. Eliminating those regulations that are unproductive and unnecessary by Executive Order. e. Reducing direct Federal spending by $41.4 billion in FY 1982. f. Social safety net of programs is exempt from any cuts. g. Continuing support of research leading to development of new technologies, but not continuing to subsidize individuals or particular business interests where real need cannot be demonstrated. h. Reducing some subsidies...
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