Current Global Economic Situation and Microeconomics in the US - Essay Example

According to the current global economic situation, the current deficit run by the US is disadvantageous to the country. However, the situation is beneficial to the country in the long term. Currently, US citizens have to cope with high-interest rates and high mortgage rates due to the country’s account deficit. The current situation may indicate that the country’s rate of investment is exceeding its GDP. Investment is not a bad thing for the country although it might cause short-term financial strains on the citizens and an unfavorable trade balance (Barschel, 2007). However, long-term benefits may propel the US to high levels of economic performance.

None of the current economic solutions can be applied to reverse the situation. To contain the situation, the government needs to encourage savings and reduce borrowing among its people. This will involve giving people the right education to sensitize them on the importance of saving within the country. Increasing tax rates will also reduce borrowing and increase savings. The government also needs to cut the country's imports while it promotes exports. Oil accounts for $140 billion of the total US imports. The government should promote energy conservation and the use of alternative energy to cut oil imports and promote a favorable trade balance. Read More