Spending Ourselves Out of Recession?

Thursday, November 15, 2012

By Andrew Disselkoen

Keynesian economics tells us that expansionary fiscal policy can help kick-start a struggling economy.  Following the Great Recession, the United States and many other countries tried this approach.  Despite your view on the effectiveness of these policies, this visualization tracks the changes in Gross Domestic Production and the changes in total debt within a country.  When a country engages in fiscal stimulus the trend line with move horizontal.  GDP growth is measured by vertical movements.  If a country expanded both simultaneously, a 45 degree line could be drawn.  Notice the vertical drops in Japan’s GDP - these signal a serious economic slowdown that began in the late 1990s in Japan.  Also note the use of expansionary fiscal policy in an attempt to lift Japan out of recession. 

 

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