Fiscal and Monetary Policy Assignment

Directions: Choose one of the scenarios below and decide what the problem is. Determine how the Fed and the Government should manipulate Monetary and Fiscal Policy. Put your information in a presentation that should include the following:

1. CREATIVE Title and picture illustration of your answer or the problem.
2. Description of the problem
3. Draw the Business Cycle graph and label where the economy is on the graph.
4. What actions should the Fed take?
5. What actions should the Government take?
6. What would the effect be on Aggregate Demand and GDP.

Scenarios:

1. GDP Growth of 6% over last year Inflation= 3%
Unemployment = 2%

Businesses are offering signing bonuses for new employees. Economists are worried that prices may get out of control in the near future.

2. GDP Growth of 1% over last year Inflation= 1.6%
Unemployment = 7.5%

Businesses are reporting reduced sales. Consumer confidence is going down, and people are worried about losing their jobs.
3. GDP Decrease of .2% under last year Inflation=1.3%
Unemployment = 9%

Businesses are reporting a surplus of inventory. Economists are predicting tough times ahead.

4. GDP Growth of 4% over last year Inflation=2.5%
Unemployment = 3.5%

Economists are warning that the economy may begin to overheat soon.

5. GDP Decrease of 1% under last year Inflation=1.4%
Unemployment = 7%

Consumers and businesses are worried about the future. Some economists are calling for immediate action.