Abstract: URING recessions Government deficits are ie garded by some as desirable, and maybe even necessary, to foster economic recovery. The standard argument is, the more severe the recession, the larger the dose of fiscal stimulus that is required. The largest Government deficit in the postwar period — $44.2 billion — was recorded in fiscal 1975, and an even larger deficit is projected for fiscal 1976. Fiscal activists contend that such unusually large doses of fiscal stimulus are required given the unusnal severity of the current recession. Monetary policy also takes on a unique character in the current economic environment. This year, for the first lime in history, the Federal Reserve System has made public its intentions for monetary growth a year in advance. To achieve its broad economic objectives, the Federal Open Market Committee (FOMC) has adopted a 5 to 7.5 percent target rate of growth for the narrowly defined money stock (M,)