Fiscal and Monetary Policy and Economic Fluctuations Name: Date: Fiscal and Monetary Policy and Economic Fluctuations Question 1 The economy of America is the single largest national economy in the world…
Download file to see previous pages...
It is estimated to be a fifth of the universal total. The country also has a mixed economy and has sustained a steady Gross Domestic Product rate of growth, high levels of research and capital investment, and moderate rate of unemployment. The current economic situation in America is evidently different from the economic situation five years ago. The present Federal Reserve interest rate is between 0 and 0.25% and the Federal Reserve aims to maintain it until 2015. The Federal Reserve decreased the interest rate by half point in December, 2008. Also, the rate of inflation in the United States as of October 2012 was 2.16%. The current rate of inflation is 2.1% in comparison to the 3.8% rate of inflation recorded in 2008. The American inflation estimate constitutes transportation, apparel, recreation, education and communication, medical care, energy, housing, and food and beverages. Finally, the rate of unemployment as of March 2013 was 7.6%. This is equivalent to 11.7 million individuals. On the other hand, the administration’s larger U-6 rate of unemployment, which incorporates those who are unemployed, was 13.9%. In contrast, the unemployment rate in America five years ago was 4.6% (Wallison, 2013). Question 2 The changes in interest rates, rates of inflation, and rates of unemployment can be attributed to several reasons. The changes in interest rates have been largely influenced by the activities of the Federal Reserve. The Federal Reverse has had an impact on the interest rates through altering the rate at which it loans out fund to financial institutions, altering reserve requirements of financial institutions, and by influencing the supply of funds through open market activities. Also, the Federal Reverse’s Board of Governors have largely contributed to the changes in interest rates by making decisions on changes in discount rates after receiving recommendations from one or more regional Federal Reverse Banks. The changes in rates of inflation have been facilitated by the activities of policymakers. The rate of inflation has changed because the law makers have assessed a wide range of fundamental inflation measures to assist in recognizing inflation tendencies. The most conventional forms of inflation measures leaves out commodities that tend to fluctuate in worth often or dramatically, for example, energy and food items. The rate of inflation has decreased because law makers have attempted to steady general consumer costs (LeRoy, 2011). Finally, the rate of unemployment has also changed due to a number of factors, one of them being employment by educational attainment. University educated individuals with a degree or higher educational qualification make up the most significant employment rate with approximately 44,648,000 of them having full time employment. In addition, this group makes up the least rate of unemployment of 4.6%. The highest numbers of unemployment are made up of people who do not have high school diplomas. These people are followed by high school graduates who do not possess college degrees. Also, people with less than a diploma constitute the least number of people who are employed, at more than 10 million. Question 3 The strategies include encouraging entrepreneurship and small businesses and lowering taxes. Small businesses in America are the base of the United States economy providing employment to a large number of people. Encouraging business startups will encourage
...Download file to see next pagesRead More
The purpose of this assignment is to analyze macroeconomics basic concepts. This assignment is a review of an existing article titled EXCHANGE RATE REGIME TRANSITION DYNAMICS IN SOUTHEAST ASIA by Monzur Hossain. This paper has investigated the currency regime choices of six Southeast Asian Countries.
The fiscal policy indicates how the government attempts to realize revenue, spending and managing the deficit. The macroeconomic goals of a government include high levels of employment and business activity, stability in prices and distribution of wealth and promotion of economic growth.
The tools have been described hereunder. Reduction in Taxes-The governments can opt for reducing the amount of taxes that are imposed on various products. This would not only help in capturing the entire business market, but will also enable effective demand stimulation at large.
The fiscal policies of the government and the monetary policies of the central bank have impacts on interest rates, inflation and unemployment in the economy. How the current economic scenario compares with the situation five years ago? There have been changes in the interest rates, inflation, and unemployment over the period.
(Farinha & Marques 2001). The government often employs fiscal policy, monetary policy or a combination of both to sway the economy back to an equilibrium position. The manner in which the government employs both policies may result to either fiscal or monetary dominance.
Monetary policy on the other side refers to actions that can be taken by the central bank to either slow or ignite the economy. Both Fiscal and monetary policies have a way of affecting the economy either positively or negatively. With reference to the
From the above discussion, it is quite clear that for any country to attain economic stability in the money supply as well as in the development of physical facilities; monetary and fiscal policies cannot be overlooked. In my opinion, governments must streamline the management of revenue collection authorities as a way of ensuring transparency and accountability in how the tax is collected and used.
Employers are adding jobs though they are low paying due to most of them being part time jobs. This is because the industries offering these jobs are the hotel, retail and healthcare industries and in most cases they do not offer full time opportunities
The inflation rate has gradually increased from an average value of -0.2 to 1.7 for the past five years. This has resulted because of the change in value of goods’ production costs and appreciation of the currency (Jaeger, 1999). The rate of
According to the discussion, Fiscal and Monetary Policy, the object of monetary policy is the stabilization of macroeconomic fundamentals, such as those relating to stable prices, stable growth rates for the economy, and the levels of employment and unemployment, with the ideal being full employment.
5 Pages(1250 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic The Fiscal and Monetary Policy and Economic Fluctuations for FREE!