Federal Economics - Assignment Example

assignment is due The main macro economic policies used by the American Government and the U.S. Federal Reserve over the last two years could not bring progress in all spheres. American Government and the U.S. Federal Reserve have been fighting hard to uphold American economy over the last two years. Obama, the President of United States has brought a comprehensive economic policy to check the economic crunch. Even though the United States faced an economic crisis and fell into the risk of recession, several economic policies have been introduced to control the economic problems. Obama never hesitated to introduce domestic economic initiatives that would check the economic issues. He requested Congress for an economic stimulus package that is worth more than 800 billion dollars. He requested this grant for dealing with the economic crisis. This grant became an integral part in the President’s economic policy for the nation. As a part of Obama’s economic policy in the United States, he had a discussion with the banking sector to bring new banking policies so that the customers will be benefited. He formulated economic policies that help US come out of the recession. However, certain resources say that no international policies have been started by him. He has also been silent in the topics of world recession. First preference of the president’s economic policy is to upgrade trade relations with other nations. Economic conditions of America went through a difficult phase. Even though US economy has faced a constant economic growth, they encountered financial crisis before few years. Its economic growth had severely impeded by the recession. Economy of US is considered as the healthiest and fast developing economy. US economy is one of the fast growing economies of the world. US government developed several monetary and fiscal policies that made the nation come out of the grave economic problem. Several actions have been taken to stabilize the economic crunch. Several new economic policies are introduced by the government so that the financial sector is steady enough to handle the nation. New economic policies of the nation are intended to solidify and build up economic growth and productivity. However growth and development are not always evenly distributed in the United States. The economic policy of US strains the equality in healthcare and financial access. Several health insurance programs have been initiates to ensure better healthcare facilities for US residents. The economic policy of the nation is targeted towards making the nation a market oriented economy. In a market oriented economy majority of the decisions are made by private business firms and individuals. Business firms enjoy a great amount of flexibility in the United States. Even the business firms of Japan and Western Europe enjoy such flexibility. Introduction of new products is expected to bring economic growth. Big developments are expected in the fields of aerospace, computers, medical equipment and military equipment. Per capita gross domestic product may experience growth according to the new American economic policy. Underemployment and unemployment rates are expected to decrease. Exports also expect a rise because of the new economic policy. The economic recovery started by the middle of 2009. It got strengthened in the following months. However, the development has not been fast enough to bring a major progress in the job market. The first phase of the economic recovery, in the later months of 2009 and in the early months of 2010, included the stabilization of the financial system and the different effects of the expansionary fiscal and monetary policies. The economic recovery also witnessed a strong boost to production from the various ventures that build their depleted inventories. But economic growth slowed down at a big rate as the impetus from inventory building and fiscal stimulus diminished. Moreover, the debt problems of Europe disturbed the global financial markets. More recently, however, US has seen certain symptoms that a self-sustaining recovery in business spending and consumer spending may take hold. Particularly household increased their expenditures, in the fourth quarter of the year. The increase was at a rate of 4 percent. Even though a major portion of this increase was visible in the increased sales rate of motor cycles, the recent gains in consumer spending appear to be sensibly large. The investment of businesses in software and new equipment increased considerably throughout the year. This is because the firms replaced all the old equipments an the demand for the products and services increased considerably. However, in the housing sector, hang over of unoccupied and foreclosed houses brought heavy impact on the prices of houses and residential construction. However, in general, increasing business and household businesses is expected to result in a rapid pace of economic recovery in the year 2011. Accommodative monetary policy is also expected to bring the same result in the year 2011, compared to that in the year 2010. A better-supportive financial conditions, for example, an increase in the readiness of banks to give loans is also expected to make a fast rate of economic recovery in the running year 2011. Such a rapid economic recovery was not found in the year 2010. Even though the indicators of production and spending, show some encouraging results, job market is not showing a considerable improvement. Job market is growing at a slow rate. The year 2008 and 2009 witnessed a loss of about 8–1/2 million jobs. However, private-sector was fortunate to see some gains in the year 2010. But these gains were not enough to accommodate the inflow of qualified people to the labor force. As a result of this, the unemployment rate could not be reduced at a satisfactory rate. The recent studies supplied some hope in the employment field. The initial claims meant for unemployment insurance is going down. Moreover, indicators of the hiring plans of firms and job openings have seen an improvement. Moreover, the employers are still not happy to add to their payrolls. It appears that it will take several more years for the unemployment rate to go to a normal level. Until we find a steady period of stronger job formation, it is impossible to consider the economic recovery to be properly established. A big decrease in the unemployment rate can only prove a proper economic improvement. The United States is expected to achieve it in the future years. On the inflation face, United States has witnessed significant increases. This is evident in certain highly visible prices, for example, the rise in the price of gasoline. Certainly, the prices of several commodities have increased recently, particularly as a result of the strong demand from the rapidly-growing rising market economies. This is accompanied, in certain occasions, by strong constraints on supply. However, overall inflation stays at a low rate. Over the twelve months closing by December, the prices of all commodities and services used by households rose by only 1.2 percent. In the previous 12 months, it was around 2.4 percent. To review the underlying trends in inflation, economists consider numerous alternative measures of inflation. One such method is named core inflation. This does not include the more volatile food and energy components. This can be a good predictor of the future of the overall inflation. In the year 2010, the core inflation was mere 0.7 percent. This was more than 2 percent in the year 2007. This rate was before the start of the recession. Wage growth also reduced. The average hourly earning rose only 1.8 percent in 2010. These negative trends in price inflation and wage are not strange. The poor performance of the economy can cause this. In spite of the governmental attempts, economy is growing only at a slow rate.  The main macro economic policies used by the American Government and the U.S. Federal Reserve over the last two years could not bring progress in all spheres. American Government and the U.S. Federal Reserve have been fighting hard to uphold American economy over the last two years. References Borio, C., and P. Lowe, 2002, “Asset Prices, Financial and Monetary Stability: Exploring the Nexus,” BIS Working Paper No. 114. Dell’Ariccia, G., and R. Marquez, 2006, “Lending Booms and Lending Standards,” Journal of Finance, Vol. 51, pp. 2511-546. Dell'Ariccia, G., D. Igan, and L. Laeven, 2008, “Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market.” IMF Working Paper No. 08/106. IMF, 2008, “World Economic Outlook, Housing and the Business Cycle; Chapter 3: The Changing Housing Cycle and the Implications for Monetary Policy” April. (Washington: International Monetary Fund). IMF, 2009a, “Lessons of the Financial Crisis for Future Regulation of Financial Institutions and Markets and for Liquidity Management.” (Washington: International Monetary Fund. IMF 2009b. “Initial Lessons of the Global Crisis for the Global Architecture and the IMF.” (Washington: International Monetary Fund). Read More