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Fiscal policy can address the economic downturn by increasing government spending. This spending can stimulate the economy during a recession. It will allow more goods and services to be bought to offset the demand. Demand and Supply would shift to the right.

Monetary policy can either lower interest rates stimulating borrowing to lender or raise interest rates which will limit the amount of borrowing a bank can do. If there is an economic downturn, the Federal Reserve should lower interest rates to stimulate the economy and businesses. Businesses will be able to hire more employees or keep the ones they currently have employed which will reduce the unemployment rate.

If the government is in trillion of dollars in debt, the best policy would be to stop printing money and increase interest rates and taxes. This would be considered the monetary policy approach. The Federal Reserve would have to increase interest rates on loans to consumers and businesses in order to lower the debt.

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