MOD 3 CA BUS 305 - Trident University International BUS 305...

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Trident University International BUS 305 Module 3 Case Assignment Monetary and Fiscal Policy 1. How is a recession defined? Is the U.S. currently in a recession? Recession is defined as the continuous two quarters of negative growth, which points at a trend of falling demand in the economy and therefore puts the economy on a declining path. Currently, the economy of United States of America is coming out of a recession which is evident from the unemployment rates which have been relatively high in the recent years, 2. Assume you are an advisor to President Obama. What fiscal policy tools could be used to stimulate the economy? Be sure to review Obama’s 2011 Budget Proposal (NY Times). Are there any specific areas that you would change? There have been many policies used in the past to stimulate the economy. The two basic areas of stimulation in accordance to Keynesian thought of economics are the expansion of demand in the economy using the fiscal policies on one side and the monetary policy on the Stimulation through fiscal policy is achieved by controlling the demand side of the economy. This is done by using the parameters which are responsible for the collection of revenue by the government and the way in which it is spent in the economy. In order to push the economy out of a recession it has to be given incentives and advantage by providing it with funds needed to increase demand. This can be done in a number of ways in the fiscal policy arena. A decrease
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in the tax collection which allows the consumer to demand more output, would give a push to the demand. A decrease in the tax collection irrespective of whether it is lump sum or proportional has to be achieved in order to increase the amount of disposable income in the
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MOD 3 CA BUS 305 - Trident University International BUS 305...

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