BUS ECON (You Decide Activity) - Assignment Example

Recommendation on Tackling the Recession It is true that the U.S. economy has fallen into a recession and there are many repercussions that come with this. They include issues like increased rates of unemployment, just like the one being witnessed, as well as negative inflation that leads to decreased levels of consumer prices. This situation also causes an increase in the purchasing power of money, something which is not positive for the economy.To tackle the recession is a very delicate issue as some of the measures taken may either hurt or help a given section of the nation.

Therefore, it calls for a disciplined approach that is backed by evidence of settling on a given intervention (Mullard, 2012). The first thing that the government usually does in cases like this is to execute monetary policy, a mandate of the Federal Reserve. It lowers interest rates thereby increasing liquidity and helping customers and businesses get back on foot. However, as many analysts would say this may end up hurting the economy in the long run as it may lead to a rise in inflation, something that was witnessed in 2001 in the U.

S (Desai, 2011).On the other hand, the idea of increasing taxes and reduced government spending will hurt the common person. This strategy is bad for the economy as consumers and business people will suffer and economic growth will slow down before it picks up again. Such tough measures are not good for the common man as they only benefit the rich (MacEwan & Miller, 2011).The best approach will be the Federal Reserve to retain the current interest rates and be involved strongly in selling bonds in order to increase the bank reserve requirement.

This will lead to increased money supply in the economy, as well as stability of financial institutions (Mullard, 2012). However, the federal monetary policies may not be enough and this necessitates the need for both fiscal and monetary policies to help the economy. Some of the fiscal measures could include increased government spending and lowering of taxes. This will balance the economy as the effects of these decisions will be considerate to consumers, as well as businesses (Desai, 2011).

ReferencesDesai, P. (2011). From financial crisis to global recovery. New York: Columbiana University Press.MacEwan, A., & Miller, J. A. (2011). Economic collapse, economic change: Getting to the roots of the crisis. New York: M.E Sharpe.Mullard, M. (2012). The politics of recession. New York: Edward Elgar Publishing.