Fiscal and Monetary Policy How Is a Essay

Fiscal and Monetary Policy

How is a recession defined? Is the U.S. currently in a recession? Explain.

The National Bureau of Economic Research (NBER) "is widely recognized as the arbiter of starting and ending dates of U.S. recessions" (Burtless, G. April 19, 2010). As such, NBER indicates, "recessions start at the peak of a business cycle and end at the trough; and are a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales" (National Bureau of Economic Research. 2011). The last U.S. recession, coined the "Great Recession," ended "in June 2009, 18 months after the economy began sliding into a downturn in December 2007" (Murray, S. September 21, 2010) according to NBER.

While "more than eight in 10 Americans think the economy is in another recession, according to a new CNN/ORC poll" (Levy, A. September 2, 2011); there has been no widespread decline in economic activity sufficient for NBER to declare a new recession.Further, a more common financial press definition of recession has not occurred; "the economy hasn't experienced two straight quarters of negative growth" (Levy, A. September 2, 2011).

Assume you are an advisor to President Obama. What fiscal policy tools could be used to stimulate the economy? Be sure to review Obama's 2011 Budget Proposal (NY Times). Are there any specific areas that you would change?

"Fiscal policy refers to the government's choices regarding the overall level of government purchases or taxes" (Mankiw, G.N. 2004). Reviewing the 2011 Obama Budget of 3.69 trillion (The New York Times. February 1, 2010), an immediate consideration regarding the outlays is that mandatory spending: Social Security, Medicare, Interest on Debt; 64% of….....