Econ 4020 reaction paper 10-11 Term Example | Topics and Well Written Essays - 250 words

Econ 4020 reaction 10-11 - Term Paper Example It means that the economy flourishes at first and then it falls suddenly. Therefore, boom and bust cycle is realized (Koo, 2003). The only way to get out of a recession is through a sustained public sector spending. It can be attained through the use of monetary policy, fiscal policies, government increasing spending and reduction of taxes. Monetary policies such as increasing interest rates of borrowing will deter private investors from borrowing. They will rather use their savings to finance investment. In the process, the more money will be released into the economy, thus, more money will circulate in the market. Therefore, this will bring down the rate of inflation and spark economic growth. Government spending should be increased for the economy to grow again. The government should service Treasury bond and initial public offers so that its citizens can gain capital to reinvest. By doing this, borrowings by citizens will reduce. As a result, private sector debt will reduce drastically, mainly because the investors will be able to repay their debt. Reduction of taxes will help a great deal in tackling a re cession. In doing this, the capital of the investors will increase. Therefore, the economy will grow since the spending power of the citizens has been