Illustrate what possible macroeconomic arguments might President Obama use to defend his $787 billion fiscal stimulus package as a part of his economic recovery plans?
Given the below scenario, prepare key tools the fed plans to use to achieve those objectives.
Information received since the Federal Open Marketplace Committee met in January indicates which the economy continues to contract. Job losses, declining equity also housing wealth also tight credit conditions have weighed on consumer sentiment also spending. Weaker sales prospects also difficulties in obtaining credit have led businesses to cut back on inventories also fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates which policy actions to stabilize financial marketplaces also institutions, together with fiscal also monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.
In light of increasing economic slack here also abroad, the Committee expects which inflation will remain subdued. Moreover, the Committee sees some risk which inflation could persist for a time below rates which best foster economic growth also price stability in the longer term.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery also to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent also anticipates which economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending also housing marketplaces, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this yr also to increase its purchases of agency debt this yr by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit marketplaces, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households also small businesses also anticipates which the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size also composition of the Federal Reserve's balance sheet in light of evolving financial also economic developments.