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The U.S. economy has fallen into a recession.




Scenario;The U.S. economy has fallen into a recession. It is a severe and deep recession, and one that;some economic analysts say may persist for at least another year. The unemployment rate has;risen to levels not seen in over 20 years. The current unemployment rate is at 8% and is;expected to rise further. The inflation rate is -2.4 percent, meaning that overall, prices are falling.;Your Role;You are the new senior economic advisor to the President of the United States, and he has;asked for your recommendation on how to proceed. Since you are an experienced Washington;consultant, you know that you should first consult several other experts and get their advice.;The following colleagues have expressed their insights and recommendations.;Keyplayers;Keyplayers;Text for Audio Recording;Raymond Burke;Economic Consultant;Well, first we have to distinguish between fiscal policy and monetary;policy. As you know, the President does have some control over fiscal;policy, along with Congress of course - but concerning monetary;policy, only the Federal Reserve Bank can determine and execute;monetary policy.;I would recommend that the President lowers interest rates further to;help businesses and consumers get back on their feet.;Kathy Lee, Former;Economic Advisor to;the President;I think the President should consider raising taxes and reducing;government spending. This will help correct the budget deficit problem;and help the economy get rolling again.;People will respect this tough decision and once they see that the;economy is improving, they will not mind the tax increase as much.;Patricia Lopez;Consultant to the;Federal Reserve;I'll just comment on Fed Policy, as that was my background and;expertise. As you know, the Fed has three tools with which to address;stability and the growth of our economy. They control the discount rate;and federal funds rate, open market operations, and the bank reserve;requirement.;I think the Fed should leave interest rates alone, but strongly sell;bonds and raise the bank reserve requirement. This will increase the;money supply and allow banks to be more stable if they hang on to a;greater percentage of their customers' deposits.;Allison Tanney;Economic Consultant;As I see it, we need both expansionary fiscal policy and expansionary;monetary policy. The President should work with Congress to increase;government spending and lower taxes.;As far as monetary policy is concerned, the Federal Reserve Board;needs to increase the money supply by buying bonds, raising interest;rates, and if necessary, raising the reserve requirement.;Activity;Your task is to take this advice and produce your own recommendation to the President. Do not;simply choose one person's advice, but pick and choose from each recommendation that you;receive. Be sure to list what you believe and why you believe it is sound advice from each of;your colleagues, and also what you disagree with, and why you disagree with your;colleagues. Then, produce a consolidated recommendation of your own. Your submission;should be approximately one page (250 words) in length, double-spaced.


Paper#29639 | Written in 18-Jul-2015

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