Paper

You Decide Week 6

Business Economics

April 7, 2012

The economy will require government intercession in order to get back in line with the government goals. Being that prices are falling and unemployment is on the rise, both monetary and fiscal policy will be necessary to bring the nation out of the severe recession. Falling prices and a -2.4% inflation rate reveal that spending is low and aggregate demand is on a downward slope.

Mr. Burke made the recommendation that in order to help business and consumers recover, the President should lower the interest rates- this action is not a presidential decision; only the Federal Reserve can set the standard for interest rates and the discount rate. The President should encourage the Federal Reserve to lower rates to encourage spending.

Ms. Lopez does not follow a track that the President should follow. The selling of bonds and bank reserves without lowering interest rates is an unreliable method to settle a recessionary period. Raising the reserve would only reduce bank lending and buying power from individuals and businesses.

Mrs. Lee’s intention to raise taxes and increase government spending will only further the recession. Taxation does not encourage individuals and businesses to spend money. The result of these actions may be opposite of the goal to alleviate the recessionary period because people/firms will store and save money, not spend it.

Mrs. Tanney’s recommendations are the least drastic of the group; however, I would not recommend following her notations. The President's focus should be on how the government actions and the spending power of individuals and businesses can be increased and supplemented. There must be some type of reduction in taxes at all levels of income as well as corporate tax reductions so that people/firms will be willing to spend money, expand business ventures and invest in capital to produce more. With less tax money flowing into the government and the likelihood of inflation,...