The Practical Economy

Given that the economy is experiencing inflation in the 5-6% range and the
Federal debt is at an all-time high, design an economic policy (that uses one or
both of fiscal and/or monetary policy) to reduce the rate of inflation.
Make sure your exploration addresses the following:

1. Define what fiscal policy is
2. Explain the strengths and weaknesses of fiscal policy
3. Define what monetary policy is
4. Explain the strengths and weaknesses of monetary policy
5. Given that the actual policy choice is somewhat normative in nature,
   outline the policy you would choose to use and justify the policy based
   on the strengths and weaknesses of your options.
6. Describe which macroeconomic theory we reviewed you used as a
   basis to develop your policy.

Sample Solution