Assume these data points about a hypothetical state of the economy:
1) inflation in the last quarter was at an annual rate of 1.5%, down from rates of 3-4% in previous reporting periods.
2) Unemployment, which had been at 5.1% in the last two quarters, increased this quarter to 5.9%,
3) The federal funds rate remained at 4.5%, unchanged in the last three meetings of the FOMC,
4) the business press reported that many commercial banks say they are “fully loaned up” now.
5) Wholesale prices were flat in the last quarter and inventory levels rose slightly.
6) Consumer confidence in the latest survey was unchanged from the previous quarter but down from six months ago.
Given these data points what macroeconomics policy tools, monetary or fiscal, would you apply? Why would they work, or not? What historical precedents are there for using the tools you recommend? Would you change your recommendations if most of the nations of Europe were in recessions? Prepare your paper in 8-12 pages, double spaced and in 12′ font, Times New Roman.
