How Can We Combat Recession Problem?

 

Khandaker Ahmed

Jane Addams High School

May 16, 2003

 

 

Introduction:

Recession is a challenging economic problem natural with free enterprise economic system like in America.  In a typical business cycle model, recession represents the stage of economy that tends to slide down from prosperity to depression. Problems accompanying a recession include low business sales, low profitability, low production, low income, low purchasing power (demand) and so on. These problems usually have potentials for costly economic, social and political consequences.  It is therefore exceedingly important for the policy makers in the government to take appropriate measures to stop the economy from further going down in order to avoid nation’s another economic disaster like the Great Depression in the 1930’s.  Since that time, the nation has repeatedly passed through times of recession.  However, the monetary policies (manipulation of money supply, interest rate etc.) administered by the Federal Reserve Bank and fiscal policies (involving variation in taxes, govt. spending etc) handled by the Federal Govt., have so far been successful to tame these recessions and thereby another depression could be avoided.

 

 

Task:

You will be divided into 2 teams.  One team will play the roles of the Federal Reserve Board that is in charge of formulating monetary policies. Other team will conceive themselves to be the Govt. authority in Washington (including Congressional Budget Committee) that is responsible for shaping fiscal policies. Both of your teams will begin with a common task of gaining an understanding of the causes and symptoms of recession or economic sluggishness as well as general nature and effectiveness of monetary and fiscal policies in fighting recession problem.  Thereafter you will start working as teams in your respective fields: one team specializing in fiscal policies and the other in monetary ones.  Historically, different governments have tried monetary and fiscal instruments in different ways and with varying emphasis (example: demand side economics of FDR, supply side economics of Regan), but all of them left much or at least some to be desired. It will, therefore, be a serious business for both of your teams to develop a set of well-coordinated fiscal and monetary policies that you think will work better for the economy.

 

 

Process: 

The above assignment will involve the following processes in order to ensure systematic progress toward its successful completion:

 

1.     Define and describe the stated problem, that is, recession

2.     Gather evidence and supportive data for this problem

3.     Identify the causes of problem (recession or slow business activity)

4.     Evaluate present and previous policies such as the New Deal of FDR, Reaganomics etc.

5.     Develop a better and more effective set of fiscal and monetary policies

6.     Select the best policy, fiscal or monetary, for your problem

 

 

Resources:

You will study basic economic books, encyclopedias etc. to build up your relevant economic concepts like variety of instruments of monetary policy (quantity theory of money, reserve ratio, open market operation, interest rate etc.), impacts of their manipulation by the Federal Reserve Board, nature of various fiscal policy apparatus including deficit budgeting and taxation etc. and how their adjustments affect the economy, historical perspective of their application by different governments etc.

 

Once you have developed the basic economic concepts cited above, you will enter the phase of comparative and evaluative study for critical analysis.  In this stage you will expand sources of reading covering web search, review report of magazine etc.

 

Research Websites:

Fiscal Policy

What is Recession?

Recession and the Economy

Federal Reserve Bank

Recession and Depression

 

 

Evaluation:

Your task will be evaluated on the basis of the following:

1.     The quality and method of research followed in adopting proposed policies

2.     The prospect of feasibility and relative effectiveness of these policies

3.     The quality of oral reports presented by both teams, the validity of arguments and assertiveness of defense in favor of your respective policies

 

 

Conclusion:

Recession has been a recurring as well as complex economic problem with far-reaching social, political, economic and ethical implications.  Historically, there have been no policy packages that can claim to be an all-right answer to the problem.  The proposed undertaking toward formulating appropriate policies will not only enhance your understanding about the dynamics of the problem but is also expected to provide an alternative policy prescriptions which may be significant for further researches, if not for practical implementation.