Question

Think Piece # 2

Instructions

This is not a research paper, but a critical analysis of a certain situation or case study. Your final document should be a couple of pages in length. You will want to consider the following as you prepare your response.

• Review the situation presented in the case below, and then identify the "main question" and any "sub questions".
• As you formulate your answer to the "question" raised in the case, be sure to use concepts about Fiscal and Monetary Policy that we have been learning about. s.
• Don't over think the answer, but explore the solution from as many angles as you think appropriate.

The case: Choosing a new Federal Reserve Chair

You have just been elected president of the United States, and the present Chair of the Federal Reserve Board has resigned. You need to appoint a new person to this position, as well as a person to chair your Council of Economic Advisers. Using your knowledge of macroeconomics, identify the personal characteristics and the views on macro theory and policy you would want your appointees to have and implement. Remember, the economic health of the entire nation and solution to keeping the economy growing will be impacted by this decision.

As you know, during the Great Recession, the Fed proposed a number of "bail out" measures to address the “great recession”. In the second part of your paper, indicate why or why not you would recommend that your new appointee use similar measures if this situation arises again. Should the Fed have a bond-buying program? Identify any new policies that you would like your candidate to follow.

You will want to use an appropriate style. Single space the document and use a double space between the paragraphs. (This means it should look like the paragraphs above). Use headings and references where appropriate.

Answer 1

The appointee should be able to manoevour the economy as best possible and not be constricted by personal biased views and solutions, he/she should be able to listen to the opinion of other people and implement solutions according to current market conditions. For example if the economy is in a downturn and the interest rates need to be reduced, in order to create a revival in the economy, the Fed chair should be able to do it.

The ineffectiveness of the conventional methods led to the creation of unconventional methods during the great recession, such as quantitative easing. The new appointee could use the same measures and ascertain for a certain duration whether it is having any impact on the market. If it is not, then it could go for unconventional methods. The Fed could benefit if it has a bond buying program, however if the debt burden is huge which it is already, then it will prove a detrimental factor. The new candidate should be cognizant of the measures it undertakes and the effects it is having on the economy. Fed chair should follow only those policies which are conventional in non risky situations and explore the unconventional one's when the economy is in dire need of the measures.