Governor/District Bank President [Name] recommends to the Federal Reserve that it should adopt a tight monetary policy to solve the current macroeconomic problems of inflation, unemployment, and economic growth. The Governor/District Bank President also recommends to the Congress that it should adopt a tight fiscal policy to solve the current macroeconomic problems of increase of growth domestic product, control of macroeconomic balance, and price stabilization.
As an example of effective monetary policy I can mention actions of Sweden and the US in summer 2010. Governments of both states adopted for that period good monetary polices, which were focused on solving two main macroeconomic problems in these countries: “to stabilize inflation around a low level and to stabilize resource utilization around the highest sustainable level” (Svensson 289). It provided Sweden and the US with rapid growth and in 2011 both countries identified positive economic changes. Regulations of interest rate by Central Banks of countries allow influencing on national prices. Sanchez (2011) considers that such actions of monetary policy can “control financial booms that may lead to a crisis” (Sanchez 521).
Tight fiscal policy has efficiency in short-term period, because it can increase investments to the country and fix them on stable level. In Malaysia, for example, good monetary and fiscal policy leaded to rapid economic growth of the country. Tax regulations as an instrument of fiscal policy help to stimulate “the household consumption and to fix investment” (Karim 63).
Thus, tight actions of monetary and fiscal policies make it possible to bring rapid positive results in a short period of time. It’s important to implement such policies for states with pre-crisis economic conditions.
Works Cited
Karim, Z.A., Karim, B.A. Fixed Investment, Household Consumption, and Economic Growth: A Structural Vector Error Correction Model (Svecm) Study of Malaysia. International Journal of Business and Society. 13.1 (2012): 63-76. Print.
Meltzer, A.H. Federal Reserve Policy in the Great Recession. The Cato Journal. 32.2 (2012): 432-445. Print.
Sanchez, M. Financial Crises: Prevention, Correction, and Monetary Policy. The Cato Journal, 31.3 (2011): 521-534. Print.
Schizer, D.M. Fiscal Policy in an Era of Austerity. Harvard Journal of Law & Public Policy, 32. 5 (2012): 453-465. Print.
Svensson, L. E. O. Practical Monetary Policy: Examples from Sweden and the United States. Brookings Papers on Economic Activity, Fall 2011, 289-332. Print.
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