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Financial Crisis in United States of America

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Key Assignment Final Draft Part I Deliverable Length: 1,500–2,000 words Two important policy goals of the government and the Fed are to keep unemployment and inflation low while at the same time making sure that GDP is increasing an average of 3% per year. It is important to have the right mix of policies and that all the variables be timed perfectly. Assume that the country is in a period of high unemployment, interest rates are almost zero, inflation is about 2% per year, and GDP growth is less than 2% per year. Suggest how fiscal and monetary policy can move those numbers to an acceptable level. What is the first action you would take as the president? As chairman of the Federal Reserve? Why? What would be your subsequent steps? Include the following concepts in your discussion: • Demand and supply of money • Interest rates • Okun’s law • The Phillips curve • Taxation • Government spending • Wages • Aggregate supply • Aggregate demand • Long run and short run • Costs of inflation • The multiplier You are to also address the following questions: • Are you confident that this will solve the problem? • Do the same policy formulas apply in an open economy as well as a closed economy? • What are the consequences of a closed versus an open economy? Assume that one of your economic advisors suggests that tax rebates is a good way to stimulate the economy. • How does the concept of the multiplier justify this initiative? • How is it computed? • Explain the theory behind the equation. • What sort of consumer behavior affects the multiplier, and how? • Another of your economic advisors thinks this is not a good idea. What would be the reasoning behind this? In the meantime, as this debate continues, the federal budget deficit keeps growing. • What is the impact on economic growth? How does the budget deficit hurt the economy? Part II Deliverable Length: 1,500–2,000 words The financial crisis of 2008 has caused macroeconomists to rethink monetary and fiscal policies. Economists, financial experts, and government policy makers are victims of what former Fed chairman Alan Greenspan called a “once in a century credit tsunami”—in other words, nobody saw it coming. Because you are now the expert in macroeconomics, your friends keep asking you your thoughts on what caused the financial crisis and whether the United States is going in the right or wrong direction with its current policies. Focus specifically on the following: • Monetary policy o What monetary policies do you think caused the crisis? o What were the effects of the policies implemented in reaction to the crisis? o Do you think the solutions worked in the short term? In the long term? • Fiscal policies o What fiscal policies do you think caused the crisis? o What were the effects of the fiscal policies implemented in reaction to the crisis? o Do you think the solutions worked in the short term? In the long term? Make sure you include the following concepts in your analysis: • Interest rates • GSAs • The financial services industries (CDOs, CMOs, the stock market, credit flows, money markets, etc.) • Tax rebates • Aggregate demand • Permanent income theory • Stimulus • TARP • Government debt and deficit • Inflation • Unemployment • GDP • Globalization • Foreign investment In your opinion, did government intervention help or harm the economy before and after the panic of 2008? Make sure you use research to back up your argument. Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help

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