As we are in a time of global financial crisis and an unofficial recession, the government takes action to try and offset the detrimental effects of our current economic downfall. The president-elect Barrack Obama said in his first press conference on Friday Nov. 7th that an economic stimulus package was an “urgent priority”, and if the Bush administration and congress doesn’t come to agreement to pass one during the upcoming months, it will be his top priority when he takes office Jan 20th.
Generally, the government takes action in the economic field by passing things like an economic stimulus package or increasing the money supply under popular demand to help its citizens in economic downfalls. Recently, the (previous) Bush administration and congress passed a new economic bailout plan as the economy is on the brink of meltdown. The bailout gives the government broad authority to buy up old mortgage-related investments and other expired assets from stumbling banks and other financial institutions, and is designed to ease the current credit crunch.
Ultimately however, the government utilizes two economic policies to boost recession: monetary policy and fiscal policy. Monetary policy controls the supply of money, the availability of money and the cost of money or rate of interest. The Federal Reserve is in charge of monetary policy and will sometimes try to revive the economy by making more money available in big banks or lowering interest rates. Congress is in charge of fiscal policy and controls government spending and taxation. Usually, in a recession the government will try to pass some sort of stimulus package through congress in order to simulate economic activity – such as the recent passing of the economic bailout plan. Moreover, since our economy appears to be in a time of high unemployment, it is typical for the central bank to stimulate the economy by lowering...