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March 24, 2016 | Author: | Posted in economics, mathematics and economics


Wikipedia has defined recession in macroeconomics as a fall in a country ‘s GDP for two or more successive quarters of a year . This may involve simultaneous declines in coincident measures of overall economic activity such as output , income , employment and sales

The United States ‘ economy is monetarism in nature thereby if a recession were to occur in the United States , one will require the right fiscal and monetary policies to effectively tackle such a recession

Fiscal policy refers to two governmental actions taken by government The first is taxation [banner_entry_middle]

, while the second is governmental spending which include but is not limited to wages to government employees , social security benefits , smooth roads , or military weapons . When government taxes , it transfers wealth from the population to the government and when it spends , it transfers wealth to the population . Fiscal policy can be contractionary or expansionary

Monetary policy is a government /central bank process of managing the amount of money in supply to achieve certain targets . Monetary policy can also be contractionary or expansionary , where an expansionary policy increases the policy decreases the If the United States were to be in recession , I will recommend an expansionary type of fiscal policy that means increasing the amount of money available to the populace . This means tax reduction and bigger government spending . This will make the populace wealthier , lead to an increase in output (national income ) and thus cushion the effect of the recession

Since there will be plenty money in circulation due to the type of fiscal policy being practiced , the interest rates will rise and so effective monetary policy will have to be put in place to check this effect while not losing sight of the target for putting up the fiscal policy . This means we have to establish a balance between interest rates and the amount of money in an economy . This will be achieved through open market operation

In a united states in recession , I will recommend a monetary policy that is accommodative . This means the interest set by the central monetary authority will be intended to spur economic growth . This accommodative monetary regime will also be based on the gold standard . This means price of the United States dollar is measured in units of gold and kept constant by daily buying and selling of base currency

With these kinds of fiscal and monetary policies , the recession in the united states , were it to occur will be safely kept in check without undue hardship on the populace


Wikipedia , the online encyclopaedia : HYPERLINK “http /en .wikipedia .org /wiki /Monetary_policy http /en .wikipedia .org /wiki /Monetary_policy . Sourced 00 :00 GMT 1 10 /10 /06

Wikipedia , the online encyclopaedia : HYPERLINK “http /en .wikipedia .org /wiki /Fiscal_policy http /en .wikipedia .org /wiki /Fiscal_policy . Sourced 00 :00 GMT 1 10 /10 /06



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