Economics: Application of Concepts
An Analysis of the Economic Situation in the U.S.
In the last five years, we have seen the U.S. economy expand but at a pace that is seen as being relatively moderate. In conducting an analysis of the current economic situation in the U.S., I will largely limit myself to inflation, interest rates, and unemployment.
Although the current economic situation is better than it was five years ago, there are signs of uncertainty that continue to suppress economic activity. This is more so the case taking into consideration the prevailing unemployment rates. For the most part of year 2008, the unemployment rate was stuck between 5% and 6% (Bureau of Labor Statistics, 2013). As at January this year, the nation's unemployment rate stood at 7.9% (Bureau of Labor Statistics, 2013). This is an indication that in comparison to five years ago, the total unemployed labor force increased significantly.
Standing at 1.6% on January 1st of this year, the U.S. inflation rate during a similar period five years ago stood at 4.3% (Multpl, 2013). The relatively high inflation rate five years ago can be attributed to the adverse effects of the 2007 -- 2010 financial crisis. It is however important to note that in the recent past, the cost of imported raw materials has fallen and labor costs have stabilized. This has helped rein in inflation.
When it comes to interest rates, it should be noted that in an attempt to stir economic activity and neutralize the effects of the recent downturn in economic activity, the Federal Reserve has in recent times attempted to keep interest rates low through the maintenance of near zero interest rates (Board of Governors of the Federal Reserve System, 2012). In comparison to five years ago, the current performance of the stock market as well as GDP growth can be regarded impressive.
Strategies the Federal Government Could Implement to Encourage People to Spend More
The federal government could make use of a number of monetary and fiscal policy tools in an attempt to encourage individuals to expand their spending. In this scenario, I propose two fiscal tools that the government...
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Capitalism is predicated on the principles of "Creative Destruction" where the loss of one item or industry, leads to the creation of another more beneficial product or industry. This principle has both destroyed and given rise to numerous industries throughout the world. For example, in the early 1900's, farming gave way to the industrialization of American made goods. Producers went from the farm lands to the assembly line of manufacturers.
Capitalism is predicated on the principles of "Creative Destruction" where the loss of one item or industry, leads to the creation of another more beneficial product or industry. This principle has both destroyed and given rise to numerous industries throughout the world. For example, in the early 1900's, farming gave way to the industrialization of American made goods. Producers went from the farm lands to the assembly line of manufacturers.
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