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PLEASE HELP THERE ARE TWO SCENARIOS

Scenario A


College graduates are moving back in with family in record numbers. They are waiting longer than previous generations to buy homes and start families. Data show downward trends in new home building, mortgage applications, and the birthrate. Multiple markets are complaining of falling demand. A national supplier of home goods permanently shut down. The media is calling babies born today part of the “baby bust generation.” Economists predict future school closings and labor shortages.

Scenario C

The media report that an “epidemic of the jobless” has emerged. Major corporations and small businesses alike are laying off workers. People are out of work in record numbers and struggling to find jobs. Some admit that they have given up looking. Housing foreclosures are increasing, while banks say they lack the funds to approve new loan applications or to adjust existing loans. Requests for unemployment, housing, and nutrition assistance are at record highs. Charity organizations are not receiving enough donations to meet the growing need in their communities. Credit card companies say the average debt balance is climbing while repayments are falling behind.

Would the Fed address the scenario with expansionary or contractionary policy? Explain.


What is a specific monetary action the Fed might use in this scenario? Identify the tool and how the Fed would use it. Explain how this would address the scenario.


What is a specific fiscal action that Congress might use in this scenario?

Sagot :

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It is correct to state that the Fed will address the scenario with expansionary policy.

What is an expansionary policy?

An expansionary policy is one that seeks to increase the amount of money  so that aggregate demand can be stimulated.

What is a specific monetary action the Fed might use in this scenario? Identify the tool and how the Fed would use it. Explain how this would address the scenario.

When money is injected into the economy using tools such as

  • Lower interest rates
  • Lower Bank Reserves etc., demand is stimulated.

What is a specific fiscal action that Congress might use in this scenario?

Examples of fiscal polices that the congress might enlist for deployment in this scenarios are:

  • Government spending; and
  • Tax regulation.

To increase aggregate demand, Government will inject more money in to the economy by buying back bonds or embarking on projects at the state and local levels.

Reduction of taxes will also help put more money in the hands of people, thus increasing aggregate demand.

Learn more about expansionary policies:
https://brainly.com/question/3885080
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