Macroeconomic Situation Essay Example | Topics and Well Written Essays - 500 words - 4

Macroeconomic Situation - Essay Examplemake up for lowering tax revenues, US local government fired various workers and educators and payrolls were let down which hampered consumer consumption (Homan, 2010). Moreover, the value of dollar is declining against many other currencies and it is expected that Fed will pursue a new round of large-scale asset purchase. Felsenthal and rib (2010) argues that decline in the value of Dollar is the result of Feds easy money policy because investors moved out of dollars and invested in other currencies to pass on higher returns. They also highlighted that Federal Open Market Committee (2010) has decided to employ its own policy tools because FOMC seems to have an explicit easing bias. The lump expectations in US are increasing and investors are showing their concerns that Federal Reserves efforts to revive the economy will further drive up the inflation and it is expected that Fed is going to use tools like duodecimal easing (Mackenzie, 2010) . Developed nations usually use advanced tools of monetary policy like quantitative easing which is an asset purchase program (Rashid, 2010). Therefore, if expansionary policy is pursed then it is expected that tax cut would increase the household consumer spending and government spending would go the economy by improving the demand and supply sides, thereby, helping the US economy to spur its recovery.In order to recover from recession, U.S. Congress has two monetary policy tools including tax policy and government spending. Carreira (2010) argues that debates in Washington on fiscal policy have been always over the mix of government spending and tax cuts. He argues that US Congress should adopt the Keynes model and to stimulate the US economy, government spending should increase and taxes should be cut. Treasury Secretary, Geithners recommendation to US Congress to extend expiring tax cuts for the middle class (Smith, 2010) is another good recommendation. Actually by bringing b ack Americans to work will