...The deep recession, in this example, doesn’t deviate far from our current economic situation we are experiencing as a nation today. With prices falling and unemployment rising, a combination of both monetary and fiscal policy will be needed in order to bring the nation out of this severe recession. Due to falling prices, with the inflationary rate at -2.4%, it is evident that both businesses and individuals are not spending and overall aggregate demand (AD) is falling. The Economic Consultant to the President, Mr. Raymond Burke, has recommended that the President lower interest rates to further help businesses and consumers “get back on their feet.” I agree with lowering interest rates as Raymond Burke said because lowering interest rates should encourage consumption and investment. However, there are some inaccuracies in what Mr. Burke is recommending. The President has neither the ability nor the authority to make adjustments to interest rates. The Federal Reserve (the Fed) is responsible for the discount rate and for setting the reserve requirements. I do not agree with raising taxes as Kathy Lee states because that would mean less money would go to the economy, and as result there would be an increase in prices and/or job cuts. I also do not agree with reducing government spending as Kathy Lee said because this would exacerbate the situation with more contraction in the gross domestic product (GDP). I do not agree with Ms. Patricia Lopez’s, Consultant to the Federal Reserve...
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...You Decide Business Economics GM545 Spring 2012 Semester, Session A Mr. President, I would like to take this time to provide a few recommendations to help our economy. As you know we are in a severe and deep recession. Many analysts say it could last for at least another year. It is urgent that the government makes both monetary and fiscal policy adjustments. We must put a stop to our growing unemployment and fix our inflation rate. I have met with several consults and advisors and would like to summarize it for you. Economic consultant, Raymond Burke, advises that you lower interest rates so that consumer’s can “get back on their feet”. I think it is a great idea, and I would encourage you to work with the Federal Reserve in making these adjustments. This would ideally encourage consumers to increases their spending, and lead to rise in aggregate demand. Kathy Lee, former economic advisor, also made her comments known. She recommends taxes be raised, and government spending be reduced. I feel that just the opposite should happen. If we decrease taxes and increase government spending, we could create more jobs. Also, with a decrease in taxes, people will have more money to spend, which will create more jobs. Consultant to the Federal Reserve, Patricia Lopez, believes that the Federal Reserve sell bands to raise the requirement of the reserve. However, if we where...
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...You Decide Regina Washington Week 6 You Decide Business Economics GM545 August 14, 2011 The situation with the United States debt need to be addressed and in order to assist the U.S. economy into getting out of the most severe recession that is giving the impression that will continue for at least another year, we need to develop an approach that cannot be accomplished with one single policy, the support will involve both monetary and fiscal policies. As the senior economic advisor with many years of experience as a consultant, I recommend a policy that will encourage growth in aggregate demand to help pull the economy out of the recession. The economy needs direct stimulus from the government since monetary policy can only provide incentives to firms and households to spend, and not actually increase spending. If the government decides to increase spending, as suggested by Allison Tanney, it will directly contribute towards increasing aggregate demand. In turn, higher aggregate demand will help increase real GDP. Another reason why fiscal stimulus is important is that it has been shown that monetary policy is not an effective tool in stimulating growth as the fiscal policy. Patricia Lopez suggests leaving interest rates in their current state, but in my opinion I say that an expansionary monetary policy that lowers interest rates will encourage firms to increase investment. It will also help increase consumption since people will be able to borrow at...
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...Regina Washington Week 6 You Decide Business Economics GM545 August 14, 2011 The situation with the United States debt need to be addressed and in order to assist the U.S. economy into getting out of the most severe recession that is giving the impression that will continue for at least another year, we need to develop an approach that cannot be accomplished with one single policy, the support will involve both monetary and fiscal policies. As the senior economic advisor with many years of experience as a consultant, I recommend a policy that will encourage growth in aggregate demand to help pull the economy out of the recession. The economy needs direct stimulus from the government since monetary policy can only provide incentives to firms and households to spend, and not actually increase spending. If the government decides to increase spending, as suggested by Allison Tanney, it will directly contribute towards increasing aggregate demand. In turn, higher aggregate demand will help increase real GDP. Another reason why fiscal stimulus is important is that it has been shown that monetary policy is not an effective tool in stimulating growth as the fiscal policy. Patricia Lopez suggests leaving interest rates in their current state, but in my opinion I say that an expansionary monetary policy that lowers interest rates will encourage firms to increase investment. It will also help increase consumption since people will be able to borrow at lower interest rates...
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...Keller 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 government spending and the Federal Reserve should increase the money the money supply. By doing one or the other, you are only doing half the job. If government spending were to increase it would help to stimulate the economy. In addition, lowering interest rate would encourage firms to increase investment. This would also aid increase consumption because now people with mortgages and debt can purchase homes, consolidate debt or even keep from homes being foreclosed. Raymond Burke stated that the President should lower interest rates further to help business but the President does not control short-term interest rates, it depends on what the Federal Reserve wants to do. Therefore his option would not work. The US economy is coming out of the most severe recession since the Great Depression and the economy needs as much support as it can possibly get. This will involve both monetary policies and fiscal policies. The economy needs direct stimulus from the government since monetary policy can only provide incentives to firms and households to spend, not actually increase spending. If the government decides to increase spending that will directly...
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...Keller Graduate School of Management Business Economics GM545 Online Graduate Course Summer Session A, July 2010 You Decide 14 August 2010 The deep recession that we have found ourselves experiencing in this example doesn’t deviate far from our current economic situation as we stand as a nation today. With economic analysts predicting that recessionary conditions may persist for at least another year, the economy requires some government intervention to put it back on track. With prices falling and unemployment rising, a combination of both monetary and fiscal policy will be needed in order to bring the nation out of this severe recession. Prices are falling, with the inflationary rate at -2.4%, making it evident that both businesses and individuals are not spending and overall aggregate demand (AD) is falling. The Economic Consultant to the President, Mr. Raymond Burke, has recommended that the President lower interest rates to further help businesses and consumers “get back on their feet.” There are some inaccuracies in what Mr. Burke is recommending. The President has neither the ability nor the authority to make adjustments to interest rates. The Federal Reserve (the Fed) is responsible for the discount rate and for setting the reserve requirements. I do not agree with Ms. Patricia Lopez’s (Consultant to the Federal Reserve) recommendation to leave interest rates alone, sell bonds and raise the bank reserve. Raising the bank reserve will discourage banks from lending...
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...Eldred Merricks | BUSINESS ECONOMICS | GM545, Summer Term | | Emerricksrvp@gmail.com | 7/18/2011 | | Question 1 Everyone’s Gasoline Problem I think in order to understand what happens with gasoline prices one must first understand what elements make the retail price. The retail price is mostly comprised of taxes, refining, and crude oil. Crude oil is what we will focus on because it represents more than half of the cost associated with gas prices. [ (Wagner, 2011) ] As supply for crude oil tightens, it drives the price of gasoline higher. When OPEC decides to cut back on the production of crude oil it effects gas prices dramatically. Moreover, change in the demand for gasoline is primarily set by the mainly determinant of demand - the number of buyers using the fuel for transportation. For example if you look at my area and the growth in the number of people driving cars and trucks, has expanded in the last few years. As you look at the average price of gasoline in my area over the last 36 months, it went from approximately $3.98/gallon in July 18, 2008 to as low as $1.48/gallon in December of the same year to now $3.65/gallon. Although we have seen a relatively spike in prices for gas, I believe that it is the “change in quantity” demanded that has cause the prices in my area to fluctuate. For example, as prices go up people to spend less time on the road and more time at home. Our travel has mostly become a result of getting back and forth...
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...You Decide Business Economics - GM545 In the case presented the U.S. economy has fallen into a severe and deep recession that economic analyst believes will persist for at least another year. The unemployment rate has risen to levels not seen in over 20 years as the current unemployment rate is 8% and is expected to continue to rise. The inflation rate is -2.4 percent, suggesting that deflation has occurred since prices are falling. Deflation happens when consumers quit buying things, and prices start going down as the demand for goods decrease combined with a decrease in the money supply. Overall there is a decrease in aggregate demand. As is the situation with the case presented – often times the adjusting mechanism forces of the free market alone are not sufficient enough to pull an economy out of recession or to shorten its length. Action by way of fiscal and monetary policies should be taken to expand the economy again and increase aggregate demand. Monetary and fiscal policy are two ways in which governments attempt to achieve or maintain full levels of employment, price stability, and economic growth. Monetary policy is the responsibility of the Federal Reserve System, which uses three main instruments: open-market operations, the discount rate, and reserve requirements to manipulate the money supply and interest rates. Fiscal policy decisions are made by the President and Congress and entail the use of government spending and taxation to influence the economy...
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...Business Economics GM545 May 2012 Chapter 16 Question 5 According to our text book, frictional unemployment is used to describe he short period of time that people are unemployed between jobs. Usually it is when someone quits a job for another job that they want and there is a short period of time that the person spends between jobs. This time is referred to as frictional unemployment. Even when people quit their jobs and don’t have another one lined up it can still be referred to as frictional unemployment if they are able to find a new job within a short period of time. (Stone, Gerald. CoreEconomics. Worth Publishers, 07/2011. p. 443). Frictional unemployment is a natural part of the employment cycle. It shows us that there are choices for both employers and employees. Typically when the economy is expanding there are jobs available and people feel comfortable moving from one job to another without much fear of being unemployed for too long. Structural unemployment is the opposite of Frictional Unemployment and refers to the extended periods of time that people spend unemployed (Nayab, 2012) Both employees and employers benefit from the presence of frictional unemployment. Employers can choose from talented pool of individuals and employees can choose where they want to work from the different options available. This leads to people finding jobs that are better suited to their needs and skills. Also when people don’t feel stuck in...
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