Suppose we are in a recession. What government actions would you recommend and why?

Question

What government actions would you advocate if the economy was suffering from high rates of inflation? Why?

Answer 1

If the economy were in a recession, I would shoot for expansionary fiscal and monetary policy. This would involve an increase in government spending and a reduction in taxes. The Federal Reserve would want to lower key interest rates and increase the money supply to meet this target. The easing of cash and credit would induce more consumption spending along with increase investment spending by firms.
However, if we were dealing with inflation which is assumed to be brought about by strong spending, I would shoot for contractionary policies to slow down the level of aggregate spending. This would involve a decrease in the level of government spending and an increase in taxes. The Fed would want to provide "tight money policy" and raise key interest rate targets to slow down the twin faucets of cash and credit. There are certain steps they can take when conducting open market operations which can achieve these goals i.e. sell existing U.S. gov't securities on the open market.

Answer 2

We are not yet in a recession. However, the economy is slowing because of high interest rates. The Fed can not lower interest rates because of inflation caused by long term raise in the money supply w/o real production gains nor increased productivity. The coming depression can only be helped by bring in new people from other countries. This cures Social Security and keeps GDP growing. The subprime melt down is another reason banks can not lower rates as more banks would fail.

Answer 3

Increase the money supply. That will cause prices to go up and stimulate the economy,

Answer 4

probably a tax break where needed