We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

The Rise And Fall Of The American Economy - Coursework Example

Comments (0) Cite this document
Phillips Curve shows the negative relationship between the unemployment rate and inflation rate in the economy. This implies that in order to reduce unemployment, some amount of inflation has to be tolerated or inflation can be reduced at the cost of rising inflation. …
Download full paper
The Rise And Fall Of The American Economy
Read TextPreview

Extract of sample
The Rise And Fall Of The American Economy

Download file to see previous pages... In the US economy, there is a high level of unemployment and the interest rates in the economy are almost down to zero. The inflation is about 2% per year and the Gross Domestic Product (GDP) is increasing at less than 3% per year. It is necessary to raise the GDP growth to about 3% per year while keeping the rates of unemployment and inflation low in the economy. Economic depression in an economy can be controlled by the formulation of effective monetary and fiscal policies. While the Fiscal Policy is administered by the American Government, the Federal Reserve (the Central Bank of America) possesses the power to implement the monetary policies in the economy. These policies are based on a number of laws and theories; Okun’s Law and the Phillips Curve are two such important theories.
The Okun’s law states that when actual output grows faster than potential output, unemployment rate in an economy, decreases and vice versa. The rate of output (GDP) growth corresponding to the stable rate of unemployment is then considered as the growth rate of the economy. Thus, it is the empirical relation between the output gap and the unemployment rate. (House of Representatives, USA, p.44) Phillips Curve shows the negative relationship between the unemployment rate and inflation rate in the economy. This implies that in order to reduce unemployment, some amount of inflation has to be tolerated or inflation can be reduced at the cost of rising inflation. (Tucker, 2011, p.453) Wages was not taken as a component of the Phillips curve as in the presence of unemployment, the bargaining power of labor is almost non-existent and thus, wages cannot be considered a key variable. However, Phillips Curve is a short-run phenomenon and there is no trade-off between inflation rate and unemployment rate in the long-run. (Mankiw, 2009, p.789) These two theories are indispensable to study monetary and fiscal policies because they show the relation between output, inflation and unemployment in an economy. A General Framework: The GDP of a country is the sum total of the values of all the goods and services produced within the geographical boundaries of a country in a particular year. Keynesian economics states that GDP can be expressed as the sum of the Consumption expenditure, the investment expenditure, the government expenditure plus exports minus imports. The equation can be expressed as: GDP = C + I + G + (X – M)…… (1) where C: Consumption expenditure of the households I: Investment expenditure G: Government expenditure X: value of exports M: value of imports Equation (1) represents the real side of the economy where the concerned variables are all real variables. Fiscal Policy: The Government can alter the level of output, consumption, employment and aggregate demand in an economy, using the two main instruments of fiscal policy – taxation and government spending. Keynesian economists believe that fiscal policy has a more straightforward and immediate impact compared to monetary policy (Genovese, 2010, p.160), as it affects the real sector of the economy, rather than the monetary sector. Expansionary Fiscal Policy: Equation (1) can also be expressed in terms of personal disposable income of the household sector as: Thus, GDP = C (y – t.y) + I + G + (X – M) where y: income of the households t: income tax rate in the economy (y – t.y): disposable income of the households Therefore, GDP = C {y (1-t)} + I + G + (X – M)…… (2) When there is a high rate of unemployment in the economy, the Government can reduce the tax level in the economy i.e. the Government reduces “t” in the economy. When “t” is reduced, the consumers are required to pay less amount of their income as tax which increases their disposable income. The household’s consumption expenditure which is a function of their disposable income, naturally record a rise. In the equation (2), as a result of the decrease in ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“The Rise And Fall Of The American Economy Coursework”, n.d.)
Retrieved de https://studentshare.org/macro-microeconomics/1391290-the-rise-and-fall-of-the-american-economy
(The Rise And Fall Of The American Economy Coursework)
“The Rise And Fall Of The American Economy Coursework”, n.d. https://studentshare.org/macro-microeconomics/1391290-the-rise-and-fall-of-the-american-economy.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
The rise and Fall of American Economics
The term economy refers to the structure of the economic life or economic activity in a particular community, region, nation, a group of regions or countries, or the entire world. Macroeconomics involves the overall performance of a particular economy. Various parameters are used in measuring economy, which include the number of people working, their total income or their production/the amount produced.
10 Pages(2500 words)Term Paper
Rise and fall of American labor unions
A project is accomplished by performing a set of activities. A construction of a basketball court is a project. It requires many activities like digging of floors, cementing, lighting, painting etc. The construction is performed by different set of activities.
21 Pages(5250 words)Essay
Growth in the Economy
According to the paper Improving the efficiency of the workers would require lesser number of workers to complete a job in comparison to the situation when the workers’ skills were not upgraded. The money saved by employing lesser number of workers can be utilized to make the payments for the technological and skill up gradation.
8 Pages(2000 words)Coursework
Economy of Finland
This led to the beginning of Russian influence upon the area. Until this time, the ties between Finland and the Soviet were close and well forged. Following the incorporation of the area into Finland, the Finnish greatly resisted such influences and chose to keep its own literature, art and other such areas, including religious affiliations, alive.
36 Pages(9000 words)Coursework
Yuan Revaluation: Its Impact on the Economy of China and U.S
Recently, the appreciation of the renminbi has been accelerating, its expected appreciation having once been enhanced. There are still controversial issues on the floating scope of the RMB and the floating exchange rate flexibility. Through the analysis of the economic impact of the RMB exchange rate reform, it would not be hard to conclude that a substantial revaluation of the renminbi will not benefit China's long-term economic development.
37 Pages(9250 words)Coursework
The Rise, Fall and Resurrection of Iridium:A Project Management Perspective
In 1991, Motorola launched Iridium Limited Liability Corporation (ILL) as a separate company. ILL was now all set to woo investors with attractive schemes which included gateway ownership for investors, distribution rights for investors in a
5 Pages(1250 words)Coursework
Rise and Fall of Empires
Amongst the prominent empires that have existed include Persia, Greece, Rome, China, Mongol, Mughal, Ottoman, Spain, Great Britain and USSR amongst others. Other measures of the strength of empires include rising population size, increased
5 Pages(1250 words)Term Paper
Napoleon's Rise and Fall
Although his family had the noble hereditary line, the family was relatively moderate. Napoleon Bonaparte had a good education at an early age and later joined the army at an early age. His successful battle campaigns in Europe saw him rise up the ranks of military very fast and very soon, he was already a very senior person in the army.
7 Pages(1750 words)Research Paper
Joseph Nyes Rise of Chana and American Power
Thus, the military growth and expansion is comparable to the show of weaponry exhibited by Germany in WWI. For instance Germany passed UK in military strength prior to WWI is incomparable to current relationship between China and USA. There was a considerable shift in the
1 Pages(250 words)Coursework
China Economy
The country itself has a large internal market and given that its produce is becoming more export oriented, it is a good indicator of economic growth. Growth in inward FDI indicates economic development in China. A country
4 Pages(1000 words)Coursework
Let us find you another Coursework on topic The Rise And Fall Of The American Economy for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us