top-rated free essay

Gm 545 You Decide (Economics)

By pkcelik Dec 12, 2010 393 Words
You Decide
GM 545
Fall 2010

Mr. President,
Monetary and fiscal policy are two ways in which governments attempt to achieve full level of employment, economic growth, and price stability. As you are aware, fiscal policy decisions are made by the President and Congress and demand the use of government spending and taxation to influence the economy; the monetary policies are maintained by the Federal Reserve. After careful consideration of the advice of Economic Advisers and Federal Reserve consultants, I came to the following conclusions regarding economic recovery in The United States: * Executing Expansionary Fiscal Policy, increasing government spending, transfer payments (Social Security, unemployment compensation, and welfare payments) and decreasing taxes will lead to increased aggregate demand (Stone, 2008). Contrary to Ms. Lee’s advice to raise taxes and decrease government spending, and in accordance with Ms.Tanney, I recommend the opposite: decrease taxes and increase government spending. Government spending will, it theory, create new jobs as government’s consumption of services from construction industry increases. A good incentive for job creation would be offering tax credits to employers who hire new, unemployed workers. Decreased taxes, again in theory, will create more disposable enabling individuals and corporations to increase their consumption. Increased consumption leads to, again, increase in job creation, corporate profits, consumer confidence, and real GDP. * On the monetary side, the government should:

* Lower interest rate
* Lower reserve requirements
* Purchase government bonds in the open market.
All these lead to expansionary monetary policy. I disagree with Ms. Lopes’ opinion that The Fed should sell bonds, raise reserves, and leave interest rates. To the contrary, purchasing bonds on an open market will increases the amount of money in circulation in the economy. When the Fed increases the money supply, it lowers the interest rate and increases the quantity of goods and services demanded at any given price level. (Stone, 2008). As suggested by Mr. Burke, lowering the interest rates and reserve requirement enables banks to lend more money to consumers at a cheaper rate since the access to reserve capital more accessible. Lower interest rates encourage consumption and investment. As the economy recovers and moves towards full employment, the government should reconsider expansionary measures, since, in the long run, these measures can lead towards budged deficits and increased inflation. References:

Gerald W. Stone, 2006, Core Economics
http://www.federalreserve.gov/
www.investopedia.com

Cite This Document

Related Documents

  • Econ 545 You Decide

    ...During these troubled times it is important to evaluate all possible economic strategies in order to apply the appropriate remedy which will alleviate our current economic ailments. We need to take the appropriate measures that will deal with specific problems such as the current recession, the unemployment rate and to create a stable inflation...

    Read More
  • Gm 545 Project 2

    ...GM 545 Business Economics Professor: William Mason Project Part II February 1, 2012Gutierrez Chapter 15, Question 11 A) The graph given to us depicts the GDP of five decades and indicates how consumption (consumers), government spending, gross private domestic investment, and net exports have contributed to the economy for the past 50 yea...

    Read More
  • You Decide Solution Gm545

    ...Graduate School of Management GM545- Business Economics Professor McLean February 13, 2012 YOU DECIDE SOLUTION The economy is needs a little help from the government but they also need to have strong and prominent monetary policies. For this situation, I agree with Allison Tanney, the President should work with Congress to increase governm...

    Read More
  • business economics

    ...THE NATURE OF RESOURCE COST STRUCTURE AND THE PRACTICAL SIGNIFICANCE OF DIFFERENT COSTS 2.2 THE FACTORS INFLUENCING OPTIMUM SIZE AND THE SIGNIFICANCE OF DEMAND AND SUPPLY RELATIONSHIPS 2.3 UNDERSTANDING OF THE RELEVANCE AND LIMITATIONS OF ECONOMIC THEORY TO MANAGE DECISIONS 3. CONCLUSION   1. INTRODUCTION: From the economic pe...

    Read More
  • Economics

    ... Economics 1 Assignment Name: Shaun Neo Wei Qiang Student CT NO. : CT0209608 Date : 18th April 2014 Module : Economics 1 Lecturer : Mr Wong Hean Hoo Outline 1) Introduction 2 2) Relating to the Article – Inflation 3 3) Some of the causes for inflation 4 4) Managing inflation 5 5) ...

    Read More
  • You Decide

    ...Role/Assignment: Your role is to determine whether distributive or integrative negotiations will be preferred in this scenario between the job applicant and the supervisor, and respond to the questions regarding the other parties who have an interest in hiring the job applicant. Use the Worksheet to answer the questions related to this scenar...

    Read More
  • You Decide

    ...to buy the present. While at the mall, Coleman saw a ring that he really liked but could not afford. He decided to steal it. He then went to Jimmy’s Poor-Man’s Bar to meet with a client, John. Jimmy’s wasn’t a client of Coleman’s, but John didn’t like his customers to see him “doing business.” Coleman was talking with Jimmy abo...

    Read More
  • Economics

    ...1. Below is a list of topics in usually studied in economics. Determine whether each topic deals under the area of microeconomics or macroeconomics. a. How Bangko Sentral ng Pilipinas influences the consumer spending in the Philippines. b. How a household decides what LPG brand to buy. c. How a firm decides whether to continue business or ...

    Read More

Discover the Best Free Essays on StudyMode

Conquer writer's block once and for all.

High Quality Essays

Our library contains thousands of carefully selected free research papers and essays.

Popular Topics

No matter the topic you're researching, chances are we have it covered.