Question

So I am suppose to write a short essayon this and I found some things online, but I am having trouble putting it into my own words. Can I have help with this please and thank you!

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 advisor. 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 economy towards economic growth.

Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical manner as appropriate for the genre of writing. Use well-structured sentences, audience-appropriate language, and correct conventions of standard American English.

Answer 1

In the current situation of economic recession which is faced by Macropoland when consumption and investment are very sluggish, unemployment rate is at 9% and inflation at 0.4% level, I as an economic adviser of President of Macropoland will take below monetary and fiscal policy measures in order to stimulate the economy toward economic growth.

Monetary Policy Measures:

1 I will guide and instruct to the Macropoland's central bank to cut interest rates/funds rate in order to increase the money supply in the market economy and simultaneously purchase of treasury bond and other mortgage backed loans of commercial and other financial institutions who are exposed to housing sector and will also ask Macropoland's President to make law to give funds to its central bank to purchase both asset based securities and government securities and commercial papers.

Real life example: After the Great Recession of 2008 which actually started in December ,2007 and ended in June, 2009 which began with bursting of 8 trillion dollar of hosing bubble which resulted into loss of wealth and cut in spending and also financial market chaos and loss of money by the investors which led to decrease in the investment. Three days after failure of three investment funds run by France's largest bank, US Fed under the leadership of Ben Bernanke has assured banks that adequate fund will be made available to banks if they require the additional funds/liquidity and Fed had reduced the Fed's funds rates from 5.25% to 4.75% and same was followed by two additional quarter point reductions to reduce the Fed's funds rate to 4.25% and Fed also created Term Auction Facility(TAF) which allowed the banks to take borrow funds from the Fed anonymously.

On January 22, 2009 Fed had reduced the Fed's funds rates to 3.75% from 4.25% and on January 30 to 3%

in mid March 2009 Fed has also started quantitative easing and purchased 1 trillion dollar of securities , both mortgage backed securities and other log term treasury bonds and second quantitative easing was done in November 2010 in which $750 billion of long term treasury securities were purchased over the next nine months. In December 16, 2008 Fed has decreased the Fed funds rates to a range of 0-0.25%

All this has helped to pul out economy out of recession coupled with fiscal measures.

2 Fiscal Policy Measures: For fiscal measures as an economic advisor of Macropoland's President, I will suggest to cuts in tax rates both income tax cut as well as corporate tax rate cuts in order to increase the savings in hands of people, especially lower and middle income groups which will result into spending and in turn which will increase the aggregate demand and then same will boost production, investment and loans in the economy.

Real life example: On October 3, 2008 US president Bush signed the Economic stimulus Act, 2008 which provided $300-$1200 billion of tax rebates to low income and middle families in order to increase savings of this target group in order to increase spending. And American Recover and Reinvestment Act,2009 provided $800 billion of tax cuts and federal spending in order to stimulate the economy for the next 2-3 years and this has also helped boost the spending and demand in US during the slow growth.

So all these fiscal and monetary policy measures had helped to pull out the economy out of recession.