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In addition, considering the fact that our country has plummeted into recession, this package is said to help the economy recover from its detrimental state. According to the main focus of the ARRA is to increase consumer consumption, investment and spending in the market. This package also co-exists with Fiscal policies, Budget deficits and Debt. The president is considering using two fiscal tools to help improve the economy which include government spending, and taxes illustrated in chapter 8 of the Macroeconomics brief edition book. The government accumulated an 819 billion dollar budget in order to spend on the entire stimulus package. This is a prime example of Discretionary fiscal policy. This policy explains the significant changes in government spending and collection of taxes, which also explains the current billon dollar budget being proposed by the government. These processes are a few ways to help our economy move toward expansion. With government spending increasing this causes a reduction in taxes. When taxes are decreased, it leaves consumers more money to spend on goods and services, causing an increase in the overall aggregate demand. In increase in the overall demand of goods and services helps regenerate the economy in an effort to push it out of the recession. In addition, an overall increase in consumer spending will allow the government to pull government spending from certain areas as consumers become more optimistic about the economy. Something the American Recovery and Reinvestment Act of 2009 definitely wants to avoid is the Crowding Out Effect. When there is fiscal expansion through an increase in interest rate, aggregate demand is forced to decrease. An example of the crowding out effect is the current lack of investment, such as fewer people are purchasing homes.


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