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Current Macroeconomic Situation - Research Paper Example

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In 2010 the gross domestic product of the Unites States exceeded $14 trillion. The U.S. economy is still recovering from the lingering effects of the global recession of 2008. In terms of GDP the economy left its recession…
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Current Macroeconomic Situation
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The United s is the largest economy in the world. In the gross domestic product of the Unites s exceeded $14 trillion. The U.S. economy is still recovering from the lingering effects of the global recession of 2008. In terms of GDP the economy left its recession state in 2010. The GDP growth rate of the U.S in 2009 and 2010 were -2.63% and 2.8% (CountryWatch, 2012). The most recent data shows more positive signs in terms of gross domestic product. During the 3rd and 4th trimesters of 2011 the GDP growth rates of the United States were 1.8% and 3.0% respectively (Bea, 2012). A problem that the global recession created which the U.S economy has not been able to manage well is an explosion in the unemployment rate. The unemployment rate in the U.S. traditionally used to be under 5%. The unemployment rate reached double figures in 2010 for the first time in decades. During the last few months the U.S. has gone down a bit which is a positive sign. The creation of jobs is very important for the economy because it provides much needed income to many American families. The graph below shows the movement in the U.S. unemployment rate during the past nine months.

(Bls, 2012).
The United States population has not had any problems with inflation in recent history. Economies that suffer from inflation are problematic because inflation diminishes the purchasing power of money. A rise in inflation is also bad because it increases the cost of acquiring money from banks and lending institutions. Investors are not attracted by economies that suffer from inflationary tendencies. During 2009 and 2010 the inflation rate in the United States was a very low 0.92% and 1% (Countrywatch, 2012).
A problem the U.S economy faces which affects the long term well being of its entire population is its overall deficit. The deficit of the Unites States is growing every year due to three factors. The three factors that are increasing the total debt of America are budget deficits, trade deficit, and a lack of savings. During the past 40 years the U.S has only been able to achieve a budgetary surplus five times. The deficits keep accumulating themselves year after year. The U.S also has the largest trade deficit in the world. In January 2012 the U.S economy generated $180.6 billion in exports and $233.4 billion in imports (Tradeeconomics, 2012). The end result was that the U.S. started the year by accumulating a trade deficit of $52.3 billion in January 2012.
The United States fiscal policy should focus on expansionary policies. The government has to invest in new industries in order to continue to generate jobs for its population. The Obama administration should support tax cuts to increase the amount of disposable income of the lower and middle class. The high class should receive higher taxes since they can afford to contribute more to improve the economy. The Federal Reserve should not lower interest rates for the time being since inflation is under control and the current lending rates of banks are low.
References
Bea.gov (2012). U.S Economy at a Glance: Perspective from the BEA Accounts. Retrieved April 8, 2012 from http://www.bea.gov/newsreleases/glance.htm
Bls.gov (2012). Labor Force Statistics form the Current Population Survey. Bureau of Labor Statistics. Retrieved April 8, 2012 from http://data.bls.gov/timeseries/LNS14000000
Countrywatch.com (2012). United States – Macroeconomic Data. Retrieved April 8, 2012 from http://www.countrywatch.com
Tradingeconomic.com (2012). United States Balance of Trade. Retrieved April 8, 2012 from http://www.tradingeconomics.com/united-states/balance-of-trade Read More
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