Assume that the economy is already in a recession and both the President and Congress have decided to do somet

Question

The President and Congress change the budget accordingly, but after 18 months, GDP only increased by three quarters of the expected amount. What factors might be responsible for this situation?

Answer 1

"Changing the budget accordingly" does not explain what they tried to do to improve the situation. There are all kinds of unintended consequences possible. They might have said we need to reduce the cost of government and reduce the taxes we charge people. This might have had the unintended consequence of putting a number of government employees out of work. It might also have reduced the confidence of the masses and they might stop buying consumer goods. Both of these unintended consequences would worsen the economic welfare of the country.
In Economics there is a historical statement from another time and venue that really fits. "We have nothing to fear but fear itself." If a significant part of the people are afraid, and lack confidence in their future there will not be the spending required to drive our economy. All other factors are secondary to the general feeling about the future by consumers.

Answer 2

They in all risk did no longer think approximately that the greater effective earnings from government spending replaced into being taxed, so as that they could ought to decrease taxes quite to extend different spending.