February 14, 2014

ECON 545- You Decide

As the senior economist to the President of the United States, I believe it’s my goal to get more people back to work and slow down the inflation rate. It is clear that both business and the individual don’t have enough money or don’t feel confident enough to spend (consumer confidence) so the overall aggregate demand (AD) is falling.

The first recommendation focuses on getting people back to work. To do this, companies need to have more money available to them. To do this, I believe that the President should encourage the fed to lower interest rates. Lower interest rates will encourage consumers and business to increase investments. It should also increase consumption as consumers will borrow at a lower rate.

My second recommendation is for the government to lower taxes. Once taxes are lowered, the individual’s disposable income is increase thus; spending would increase (AD). Spending would also help increase consumer confidence. Once consumer confidence increases, money will flow back into business, allowing businesses to hire back employees.

My third recommendation would be for the government to increase spending. When government increases spending, which increases the flow of money into the private sector, the results are increased disposable budgets to consumers. This will increase the (AG) as well. I believe the government should filter money into the American infrastructure to strengthen the backbone as it did after WW2. The goal being to get more people back to work.

I believe these recommendations will help increase the (AD) which will also have a positive effect on the real GDP. It will be a slow process but I feel these recommendations will help stabilize the economy and bring unemployment down to a more manageable