Macropoland is currently experiencing a recession--consumption and investment are very sluggish, and unemployment is quite high at 9%. Currently, inflation is very low at 0.4% (the historical average rate of inflation is about 2%). The Macropolish President has just hired you as her economic adviser. Your job is to prescribe policy that would enable the economy to recover from the recession. The Federal Reserve bank has lowered rates down to nearly 1 and 2% nominally, you are not a fan of big government and full understand how deficits work especially during a recession. Based on this please provide a report with your recommendation on how to improve the economy using both monetary and fiscal policy. Also, highlight what unintended consequences both might have.
Answer
The different proposals that can be given are as per the
following -
Monetary policy measures:
a) Decrease in CRR and the SLR will prompt more excess reserves
subsequently the lending capacity of banks will expand, prompting
the greater investment.
b) Fed should buy the government securities from the open market so
as to inject the money into the economy.
c) Fed should bring down the discount rates so that banks can
borrow from fed and could lend more so as to increase the demand in
economy.
Fiscal policy measures:
a) The government should reduce taxes so that public has more money
to spend .
b) Deficiency financing can likewise be a method to increment the
rate of inflation and reaching the.
Note please give like thanks
Macropoland is currently experiencing a recession--consumption and investment are very sluggish, and unemployment is quite high...
Macropoland is currently experiencing a recession--consumption and investment are very sluggish, and unemployment is quite high at 9%. Currently, inflation is very low at 0.4% (the historical average rate of inflation is about 2%). The Macropolish President has just hired you as her economic adviser. Your job is to prescribe policy that would enable the economy to recover from the recession. Explain how you could use the standard tools of expansionary monetary policy and expansionary fiscal policy to stimulate this...
the economy is experiencing a recession and high unemployment a. Use an AD-AS model together with the Fed Funds market to represent ther short ran equilibrium in b. What types of monetary policy (i.e.. expansionary or restrictive) should the Fed implement? c. In implementing the policy you suggest. which actions (please give at least two actions) should the Fed take to achieve this policy? Explain how t he y policy would address this problem and the consequence of the monetar...
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