In: Accounting
Essay 1
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.
In your own words!
Answer:
Recession means circulation of littile money sothat very little investment .. The polices that increase money circulation are .
1) Ineterest rates to be reduced
2) Government should increase the spendingd
3) Tax rates should be cut or prohibited
4)Reserve ratio to be reduced .
By above policies the aggregate demand will increase due to money circulation policies. As too much money is chasing only few there are increase in prices .
Onthe otherhand , Fed should lower inrterest rate through open market purchase of the government Securities which will increase money supply in the economy and reduces the rate of Interest .
The reduced interest rate along with raising aggregate in abovewill lead to risein investment. As the business sentile will give optimistic future expectations of the saleof their product sothat overall national income leads raise in economy .