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Gm545 You Decide

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Mr. President, due to the current severe and deep recession the economy is experiencing, I would like to suggest a combination of both monetary and fiscal policies that I believe can aid in stabilizing the economy. The fiscal and monetary policies are completely separate of each other and are handled by different components of the U.S. government.
Agreeing with Mr. Burke’s and Ms. Tanney’s statement, the fiscal policy is controlled by Congress and the President with the use of its two tools, government spending and taxes, to stabilize the economy. In contrast to Ms. Lee’s advice, executing an expansionary fiscal policy of lowering taxes and increasing government spending would increase AD. Increasing government spending helps in stimulating the economy by increasing consumer confidence and creating employment. To determine by how much increasing government spending increases the overall GDP, the spending multiplier is used. By lowering taxes, consumer’s disposable income is increased. They have more funds available for spending however, would only spend a certain amount in which we call this the marginal propensity to consume. Any changes in taxes affect the tax multiplier.
The monetary policy is the use of the money supply and credit to help stabilize the economy. In agreeance to Ms. Lopez’s statement, the money supply is controlled by the Fed Reserve Board of Governors, central banking in the U.S., in which they use the three tools of discount rate, open market transactions, and the reserve ratio to balance the economy. I completely disagree with the statements made by Ms. Lopez and Ms. Tanney in regards to how the monetary policy should respond during a recession. The advice that they are suggesting would be valid in a case where the economy is responding to rapid inflation by which increasing the discount rate, selling bonds, and increasing the reserve

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