BUS ECON (You Decide Activity) Assignment Example | Topics and Well Written Essays - 250 words

BUS ECON (You Decide Activity) - Assignment Example The first thing that the government usually does in cases like this is to execute monetary policy, a mandate of the Federal Reserve. It lowers interest rates thereby increasing liquidity and helping customers and businesses get back on foot. However, as many analysts would say this may end up hurting the economy in the long run as it may lead to a rise in inflation, something that was witnessed in 2001 in the U.S (Desai, 2011). On the other hand, the idea of increasing taxes and reduced government spending will hurt the common person. This strategy is bad for the economy as consumers and business people will suffer and economic growth will slow down before it picks up again. Such tough measures are not good for the common man as they only benefit the rich (MacEwan & Miller, 2011). The best approach will be the Federal Reserve to retain the current interest rates and be involved strongly in selling bonds in order to increase the bank reserve requirement. This will lead to increased money supply in the economy, as well as stability of financial institutions (Mullard, 2012). However, the federal monetary policies may not be enough and this necessitates the need for both fiscal and monetary policies to help the economy. Some of the fiscal measures could include increased government spending and lowering of taxes. This will balance the economy as the effects of these decisions will be considerate to consumers, as well as businesses (Desai,