Question

2. Determine alternative actions that could have been used by the federal government or the central bank to alleviate or divert the economic crisis that prompted your selected government policy from part 1. Explain if your alternative action is better for the overall health of the economy or not. (6-8 sentences)

Answer 1

To address an economic crisis, alternative actions that the federal government or central bank could have taken include implementing targeted fiscal stimulus programs, such as direct cash transfers to households and small businesses, or increasing public investment in infrastructure projects. These alternatives could have provided immediate relief to consumers, boosting demand and encouraging spending, thus stimulating economic growth.

Additionally, the central bank could have considered more aggressive monetary policies, such as quantitative easing or lowering interest rates even further to increase the money supply and encourage borrowing. While these actions could have injected liquidity into the economy more rapidly, they also carry the risk of inflation or asset bubbles in the long run.

In assessing whether these alternatives might be better for the overall health of the economy, targeted fiscal stimulus could be seen as more effective in promoting equitable growth by directly aiding those most impacted by the crisis. Conversely, aggressive monetary policy without careful calibration may lead to instability. Ultimately, a balanced approach that combines both targeted fiscal measures and well-monitored monetary policy could yield a more resilient economy while mitigating potential downsides.