Read the two articles about the bailout package One was writ

Read the two articles about the bailout package. One was written in 2011 describing the bailout as a failure, the other is from 2014 discussing how the government is being paid back.

http://money.cnn.com/2014/02/21/news/economy/fannie-profit-bailout/ (copy and paste the link into your browser)

https://www.nytimes.com/2011/03/30/opinion/30barofsky.html?_r=0 (copy and paste the link into your browser)

Answer the following questions:

1.) The bailout would be an example of what type of policy from the AD/AS model?

2.) Do you believe the bailout should have ever been done? Why or why not?

3.) What is your opinion on the bailout package knowing that the funds are being paid back? Explain.

Solution

Ans

1 it is AS policy because it keeps firms intact. These firms produce goods or services

2 we think it was necessary because otherwise many firms would have failed creating havoc and unemployment all around. It was a new tool of intervention and proved quite effective. Remember failure of one firm leads to failure of many interdependent firms

3 I again believe it was good decision. The fact that funds were received back lends more credibility to my argument.