You Decide Week 6

Gm545 Business Economics - You Decide Week 6

Dear Mr. President,

As you have asked for my advice and recommendations to how you should deal with the economy during this recessionary period. I have talked and consulted with your other devisors. Listed below are my conclusions and recommendations to you.

As you are aware the country has fallen into a recession and some of the major consequences of that is what we are seeing with prices falling (inflation -2.4) and unemployment rising (8%). A combination of both monetary and fiscal policy will be needed in order to bring the nation out of this severe recession. Since the Federal reserve has the authority to deal with monetary policy and you have the authority to deal with fiscal policy, I would suggest that you use an expansionary fiscal policy to help the economy to recover faster.

Due to falling prices, it is evident that both businesses and individuals are not spending and overall aggregate demand (AD) is falling. Your Economic Consultant Mr. Raymond Burke, has recommended you to lower interest rates to further help businesses and consumers “get back on their feet.” I agree with lowering interest rates as Mr. Burke has said because lowering interest rates should encourage consumption and investment. But you have no authority over monetary policy, this is the FED's job. Hopefully the Federal Reserve will lower interest rates, the discount rate and the reserve requirements.

Mrs. Kathy Lee your Economic Advisor has suggested that you Mr. President raises taxes. I do not agree with that, because it would mean less money in to the economy, and as result there would be an increase in prices and possibly higher unemployment . I also do not agree with reducing government spending as Mrs. Lee said because this would make worse the situation with more contraction in the gross domestic product (GDP).

Also, I do not agree with Mrs. Patricia Lopez’s, the Consultant to the Federal Reserve, she recommended...