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?
