Question
Economic Goals (for background knowledge): The natural rate of unemployment for the U.S. economy is estimated to be around 4.5%. A healthy, sustainable real GDP
Economic Goals (for background knowledge): The natural rate of unemployment for the U.S. economy is estimated to be around 4.5%. A healthy, sustainable real GDP growth rate is estimated to be around 2.5%. An ideal rate of annual inflation is thought to be around 2%.
Economic Conditions (the setting for your analysis): Assume that over the course of a year, the US economy experiences an unemployment rate that rises from 4% to 8%, a real GDP growth rate of negative 4%, and an inflation rate of negative 1%. You'll use these economic conditions in relation to the above goals as the context for the following analysis.
1/ Explain what the above data reveal about economic conditions and thoroughly explain how either fiscal policy (both automatic and discretionary) or monetary policy could be used in response.
2/ Thoroughly explain at least 3 arguments that could be made in opposition to the policy response you explained.
3/ Given both the policy and arguments against the policy you have explored, would you support the usage of this policy in this situation? Thoroughly explain why or why not.
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