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Monetary and Fiscal Policy

← How International Transactions Affect TaxationThe Emerging Global Economy →

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It is now clear to any economist that our country is experiencing severe recession. The country’s unemployment rate has risen to a level that has never been seen in the last 20 years. With the research showing that our recent unemployment rate is 8% and an inflation rate of 2.4%, it is not to be doubted that the overall prices of our products are already being negatively affected. With a clear indication of the possibility of the situation worsening, it is only advisable that certain measures be taken to avert the situation. Having consulted widely with other experts, I therefore present my recommendations on how you could proceed in addressing the situation. 

The recession our country is experiencing will have a negative implication on our economy and should thus be remedied. In giving my recommendations, I will seek to either agree or disagree with a number of views by our key economists. First, I find Burke’s recommendation of lowering the interest rates not very appropriate since it will make the government lose its revenue from taxation, which is meant to boost the economy.

On the other hand, I agree with Kathy’s recommendations that the government should not consider increasing taxes since this will worsen the ability of the U.S citizens to spend on the various commodities. I also find Patricia’s idea of the need to avoid interfering with the interest rates appropriate since it makes it easier for the investors to plan. However, I do not recommend the idea of strongly selling the bonds with the aim of raising the bank reserve requirement since the banks will want to keep to the increased rates of reserves which will, in turn, limit their lending capacities to the potential investors.

Additionally, I agree with Allison’s idea of the need for Federal Reserve Board to buy the bonds since it would help increase the supply of money and hence the general demand which will automatically boost investment activities. On the other hand, I disagree with the idea of raising the interest rates and the reserve requirements since this would discourage investors and limit the amount of money supplied to the economy.

In conclusion, I recommend that you maintain the current interest rates, encourage the buying of the security bonds by the banks, and finally; let the Federal Reserve Board reduce the bank reserves requirements so that money is made available for the potential investors. 

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