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Comparative Economic Systems - Essay Example

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Comparative Economic Systems Abstract In 2007 to 2009, the US economy had to face the worst economic recession in the history. The financial market crashed, housing debt increased, GDP fell and the unemployment rate also increased during that period, igniting a crisis situation within the economy…
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Comparative Economic Systems

Download file to see previous pages... In order to deal with the loss experienced by recession, each nation implemented certain monetary and fiscal policies applying distinct frameworks to stabilize their economy. However, the level of growth and recovery has been noticed at an uneven rate in every nation. Hence, it can be assumed that the economic policies applied, might have evidently worked in different principles for each nation. Introduction At present, the US economy is continuing to undergo an average growth and recovery from its recessionary consequences. The recovery started with the growth of its Gross Domestic Product (GDP), but has been decelerated significantly throughout 2011. Several economists referred that to date, the economic recovery of the US is uncertain and disappointing (Byun & Frey, 2012). Furthermore, the GDP rate of the UK is expanding at a modest rate. Confronted with the slow economic growth and recovery, Americans have started to suspend formation of families, acquisition of homes and vehicles among others. Although four years have passed since the recession, the US economy has not observed the superfluous growth that often triggers retrenchment (Miller & Matthews, 2013). Based on this aspect, the essay describes about the economic problem faced by the US. Furthermore, the essay also explains the policy alternatives of the UK and Germany for attaining economic recovery and growth. Policy Responses for the US Economic Growth and Recovery Monetary Policies In order to boost economic stability within the US, the government has utilized conventional monetary policies by reducing the federal funds to about zero for stimulating the economic activity. Subsequently, the rate of federal funds reduced from 5.25% in 2007 to 0.16% in 2008. Since the unemployment rate increased, the government reacted by implementing numerous policies for soothing the financial market and increasing the availability of credit for people and organizations. For example, the US government boarded large-scale asset purchase program and quantitative easing scheme in order to drive down the mortgage rate. These policies resulted in better channel for liquidity and encouraged better confidence among investors (Byun & Frey, 2012). Fiscal Policies The fiscal policies of the government majorly included functions in two grounds namely spending and tax policy. In order to ensure economic growth and recovery, the US government also sanctioned Economic Stimulus Act in 2008, which was intended to deliver tax discounts to households and quicker depreciation regulations for business. With respect to extraordinary actions, the government also enacted Emergency Economic Stabilization Act in 2008 for improving the aggregate capital position of banks and removing troubled assets from balance sheet. Furthermore, government has also extended the unemployment benefits and temporarily reduced the payroll tax to support its failing economic growth (Elwell, 2013). Economic Growth and Recovery in the US The economic recession that was strategically engrossed by the US economy has alleviated due to the adoption of unparalleled policies. During 2010, the deep and long international recession has bottomed out and economic recovery of the US has proceeded. Apart from the US, in Europe, the UK and Germany has also returned to positive economic growth, however applying a distinct policy framework (Cronin, 2013). After the global economic recession, the US economy returned to a positive growth in the third ...Download file to see next pagesRead More
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