Recommendation to the President Name: Professor: Course: Date: Recommendation to the President The level of inflation in the economy

is too low to provide any incentive to investments. Inflation levels should be positive. Negative inflation means that price levels are continuously

reducing and this might lead to fear of investing in an economy whose prices are on the decrease. Inflation of above a 1-digit positive figure is also detrimental to investments. Such levels lead to an increase in interest rates which consequently reduce the levels of investment. This leads to reduction of employment rates and in the end, GDP levels of the country will fall. To solve the current economic problem at hand, inflation should be raised from -2.4% and the level of unemployment reduced from its current level of 8%. I agree with Allison Tanney that both expansionary fiscal policy and expansionary monetary policy are vital in finding a solution to the current state. An increase in government spending would result to increased employment reducing the unemployment rates. This is because the governments investment would create demand for certain products and also employ human capital and labor. Lowering of taxes also is an incentive to private investments (Rudolph, 76). Businesses can therefore divert the cost savings to employing more human capital and labor. An increase in money supply translates to higher inflation and therefore business can make more investments without fear of risk resulting from reducing economic prices.

Recommendation to the President I disagree with Allison Tanney regarding raising the reserve requirement. This would reduce inflation. Kathy Lees advice would lead to more unemployment and lower inflation levels. Increased sale of bonds and a raise in the bank reserve requirement would reduce and not

increase the money supply as Patricia Lopez suggests. Finally, Raymond Burke recommendation of further reduction in interest rates would lead to lower inflations that are unsustainable.

Recommendation to the President Works Cited Rudolph, G. Will It Take a Crisis to Fix Fiscal Policy? Washington, DC: The Urban Institute. 2011