You Decide Project

With the US economy in such server recession, the government would need as much support as it can possibly get. This would involve both monetary and fiscal policies.

First, the government should start with an expansionary monetary policy that lowers interest rates. This would encourage firms to increase investment. This should also help increase consumption as people are able to borrow with lower interest rates.

Since monetary policy can only provide incentives to spend, which is not actually spending, the economy also needs direct stimulus from the government. Government should increase spending, which would help increase aggregate demand, which in turn, will help increase the nation’s real GDP. Fiscal policies are more important than monetary policies at times like this because history had shown that monetary policies are not as effective in stimulating growth as fiscal policies are.

Raymond and Patricia, it is a good idea to lower interest rate. However, with no room to decrease interest rate further, we can use other alternative expansionary monetary policies that are more open market operations and have more direct involvement in the financial market by providing credits and short-term debt, as Patricia mentioned.

Government should also implement tax-cut. By implementing tax-cut, working today would be more attractive than working tomorrow, therefore increase labor supply. While government should focus on increasing real GDP in the short run by any means necessary, it is very important to keep long-term picture in mind because our nation would eventually need to pay back any borrowings that incurred today.

Kathy and Allison, Raising taxes in the short run would hurt the spending power of people, for that reason, we should implement tax cut instead. However, it is a good idea for the government to prepare plans to raise taxes in the long run to counter the deficit they are running into now.

To summarize, our government should implement...