Essay-Monetary and Fiscal Policy
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.
Solution Preview
Fiscal and Monetary Policies to Control Recession
Introduction
Macropoland like any other country in the world was significantly affected by the 2008 financial crisis. Initially, the economy was doing well, and the unemployment rate was at an acceptable rate of 4 per cent. However, the country has been experiencing a slow economic growth combined with high levels of unemployment. The country’s GDP and consumption dropped while inflation reached 0.4 per cent a rate that is lower than the historically low level of 2 per cent. Furthermore, the level of business investments fell even further after the crisis.
(790 words)