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Analysis of Recent Microeconomics Events in the United States - Term Paper Example

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This paper talks about recent economic events in the United States from the microeconomic perception. The country experienced an economic slowdown in recent years, resulting in reduced consumer spending. This pattern created a negative impact on investments and borrowings in the country…
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Analysis of Recent Microeconomics Events in the United States
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Download file to see previous pages This paper outlines the magnitude of the influence of microeconomic trends on the overall state of American economy. Issues under consideration of micro economists vary from what factors impact the savings of consumers to how much firms should produce under the given circumstances.It is known that microeconomic decisions taken by individuals and organizations are influenced by considerations of cost and benefit. Costs relate to financial cost pertaining to cost of finance, such as total variable cost, opportunity cost and fixed cost.
Interest rates have always been an indicator of a country’s economic status. Increase in the interest rates indicates a number of things such as the economy’s ability to absorb high interest rates, meaning that increased interest rates imply that the central bank assumes that different entities in the country will continue borrowing at higher interest rates, meaning that productivity will increase and the economy will grow. Increasing interest rates also tend to reduce inflation. Interest rates in the US have continued to remain around zero, which indicates that the economy is facing difficulties in enhancing production. It is believed that increasing interest rates at this time will create economic complexities for the country.
Consumer confidence in America is presently very low, which is evident from the large numbers of homes that continue to remain on sale. The country needs to focus more strongly on issues such as consumer prices, housing market, debt load and interest rates.
The country’s debt load continues to be massive and is growing steadily, which has depressed the economic environment and minimized growth. Whatever growth that happens is offset by the increasing debt, while low interest rates prevent the economy from affecting a recovery in the short run. Low interest does increase borrowings for businesses and individuals but the default rate in the US is very high; almost twenty percent. Consumers are reluctant to buy new homes and prefer to wait and watch as they are not currently prepared to take more loans during times of uncertainty, primarily because assets have the tendency to decline in value in the short term. In servicing its own debt, the US relies heavily upon foreign money by offering its assets such as government bonds to other nations. However, America’s credibility in this regard is gradually declining in view of its increasing debt. Countries such as China have begun to question the ability of the US to repay its debts. The US appears to be losing its status of a world super power because many countries have started looking elsewhere for investing. The employment situation in the US continues to deteriorate and the numbers of good jobs are consistently decreasing. The numbers of American citizens living in poverty are also increasing. Over the last few years, millions of job opportunities, thousands of businesses, and billions of dollars of the country’ ...Download file to see next pages Read More
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