The current macroeconomic situation in the U.S. right now is troublesome to many. The U.S. recently came out of a recession which many are arguing could have been a lot worse without government intervention, and we could be facing a double dip recession where we might be heading into a worse recession than we experienced during the last one. This is a macroeconomic problem since it is the entire economy that was affected.
“As fears over recession mount, house prices slide, unemployment rises and millions fret over the cost of their mortgage (Besley, 2008).” The U.S. has been trying to overcome unemployment, and inflation, while fighting to stay out of another recession. In order to combat these government, and the Federal Reserve or the “feds” for short have different tools and policies to try and beat inflation, and recession. The “feds” get together every six weeks in a private meeting, and determine what to do with the economy. They try and keep a balance as to not have too much inflation, but also not head into a recession. Usually Congress is good at keeping the recession in check while the “feds” worry about inflation.
The tools for fiscal policy are raising taxes, lowering taxes, and on whom. They can increase spending on the military, infrastructure, or decrease spending such as on public services or military bases. Another set of tools is on monetary policy such as reserve requirements, discount rates, open market operations, and printing money. The government should utilize an expansionary fiscal policy, using money to increase the liquidity in the system. Despite that, they should take care not to over-do it, as too much money out there will make the dollar worth less. The current downward trend for interest rates should help to expand the economy; however, loans are hard to come by and lowering the interest rate has little impact if businesses