What should the U.S. Congress and the Federal Reserve do about the current macroeconomic situation, i.e. inflation/recession?What should the U.S. Congress and the Federal Reserve do about the...

What should the U.S. Congress and the Federal Reserve do about the current macroeconomic situation, i.e. inflation/recession?

What should the U.S. Congress and the Federal Reserve do about the current macroeconomic situation, i.e. inflation/recession?

Asked on by cbuteaux

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litteacher8's profile pic

litteacher8 | High School Teacher | (Level 3) Distinguished Educator

Posted on

One of the biggest drivers of the economy is the middle class. Right now, the middle class is being creamed by the housing market. Unemployment, underemployment and underwater house values are serious concerns. When the middle class does not have money, the economy slows. Yes, there are other factors involved here. The housing market crash killed the credit markets, and that affects everyone. What should Congress do to help the economy? Stop and reverse the foreclosure crisis, unfreeze the credit markets, and get the middle class back to work.
pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

First of all, we are not in a recession right now.  We are in a recovery, albeit a slow one.  Second, inflation is not particularly high right now.  If you look at the "fintrend" link below, you will see that inflation today is not high compared to most other times in the past decade.

As to what Congress should do, it is not clear.  Macroeconomics is not a precise science and no one can be sure what impact various actions will have.  Many people think that what Congress really needs to do is to reduce government spending and the deficit.  Conservatives, in particular, believe that this would lead to an increase in aggregate supply.  This would happen as people became more confident in the direction of the country and the economy.  An increase in aggregate supply would increase GDP and reduce the price level.  This would be perfect for making sure we don't go into a recession or have inflation.

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