¶ … Economy, Monetary Policy, and Monopolies
"The benchmark interest rate in the United States was last reported at 0.25%," (United States interest rates, 2012, Trading Economics). This is one of the lowest interest rates ever recorded in the history of the U.S. economy. It is a manifestation of the Fed's recent attempt to spur economic growth by encouraging consumers to borrow and spend more and to alleviate the pressures upon debt-ridden consumers, particularly those with adjustable rate mortgages. As a point of comparison, the interest rate in April 2007 was 4.963 (April, 2007, Treasury Direct).
current inflation rate is 2.30% while in 2007 it was 2.85% (Current inflation, 2012, Inflation Data). Although a lower inflation rate, in general, is better than a higher interest rate, this is keeping with the overall perception that the U.S. is in weaker economic shape than it was five years ago. Of course, as manifested in the 1970s, it is possible to have 'stagflation' or high interest rates and high unemployment, which the U.S. is fortunately not manifesting. Still, the U.S. unemployment rate currently stands at 8.1% (Economy at a glance, 2012, BLS). While this is an improvement over the statistics of 'the great recession' of 2008, in 2007 the unemployment rate was 4.6% (United States unemployment rate, 2012, Info Please).
Q2. One way to rapidly stimulate the economy is to free up the money of people who tend to spend a larger proportion of their income upon commodities rather than save their additional income. Poorer people tend to spend a larger proportion of their income on goods and services, and have greater immediate need for physical items, so giving more money back to poorer members of society via...
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