Unemployment has increased to 11.2% this month, higher than it has been for the last 28 years. Retail sales, sales of motor vehicles, and durable good sales have all decreased dramatically over the last seven months. Housing sales are down an average of 6% over the last seven months. Foreclosures on residential properties are the highest since the Great Depression due to sub prime loans. The number of discouraged workers has increased dramatically over the last year (If we add the unemployment rate to the Discouraged worker rate, then the total unemployment rate is around 17.5%). GDP has decreased 6.8% over the last year and the forecast is that GDP will continue to decrease. Consumer confidence is at its lowest point in 30 years. Business inventories are at an all time high. The inflation rate over the last year has been less than 1%. Answer the following questions below:
1. The problem in the economy, if any (Describe from the information given in the paragraph, why you chose that particular problem).
2. The monetary and fiscal policy to be used;
3. The tools of the policy and how they work to correct the problem;
4. Any undesirable consequences that may arise when the Fed and/or the federal government implement the policy.
5. In you discussion please discuss the branch of the government that will implement each of these policies (Federal government or Federal Reserve).
