Macroeconomics is an analysis of the whole economy with respect to national income, output, consumption, savings, investments, the balance of payment deficit and international finance (Krugman, 2009). A stable economy is illustrated by an equation such as Y= C+S+I+EX-IM. The specifics in the equation are the macroeconomic variables for an open economy. A reduction in national income following a decrease in productivity has lead to an economic downturn in the United States of America. The economic situation is in the form of recession since the factors of production are not utilized to the maximum. The hampered growth affects directly business cycles, which are supposed to be generating national incomes and ultimately shaping investments levels, employment of factors of production, and higher saving ratios. To vividly explain the description of recession, it is important to note that the domestic product of a national contract and can last for several months. Recession reveals itself by its nature of reducing the expenditure of a country. In the United States of America, the current situation shows that problems are not just sub-prime mortgages but a whole system of finance for sub-prime. It is important to note that the housing recession is progressing daily towards the worst situation for the economy. There is a prediction that the prices of houses can fall by more by than 20% (Krugman, 2009). This affects the owners of such houses. At the moment, mistakes, foreclosure, and misbehavior are finding ways from sub-prime to prime mortgages. Commercial real estates are starting to face a downturn in the residential estates. To add to this, credit cards and automatic loans are on the rise. This is an indication of a collapse in consumer credit. Banks and other financial institutions that financed some projects are facing a risk of default payments. This corporate default sums up to bring down the productivity of a nation. Appropriate action to take The federal open market committee (FOMC) This makes up a component of the federal system of reserve and is mandated to monitor the operation of the open market. The committee is responsible for making a decision on the interest rates of Federal Reserve banks, thus affecting the money supply. If the interest rate is lowered, people will borrow money from banks, consequently leading to an increase in money supply in the market (Krugman, 2009). This can cause inflation since there is more money chasing the same good. During the recession, the committee can make use of this monetary policy to encourage people to borrow and invest in various sectors. Easy money This tool is also available during the recession and can be achieved when a federal bank buys securities from subsidiary banks and the public. In this context, money is exchanged for bonds. Some financial institutions also have more reserves, thus able to give more loans to investors and the general public. If the reserve ratio is lowered, banks would have more money to give to the public (Heyne, Boettke, & Prychitko, 2002). The net effect of increasing the money supply is that interest falls, investment, and aggregate demand increases. Expansionary fiscal policy Policymakers can employ the use of expansionary fiscal policy to stimulate t