Some US Economic Indicators - Essay Example

In addition, through increasing the level of government spending, the government will be capable of providing incentives for production, which will create employment opportunities, reducing the level of unemployment from 8.2%.GDP, income and consumption growth have been positive but also growing below the expected rates. The economy is expected to have a GDP growth of approximately 2% in 2012 and 2013. Household consumption increased by 2.2% in 2011, a factor that resulted from jobs recovery and fiscal stimuli (Stewart, 2012).

Because of the increase in gasoline and oil prices, spending on consumption has risen drastically. In order to compensate, the United States consumer is borrowing again, especially for auto loans; this has made consumer credit grow drastically in 15 of the last 16 months. The government can reduce the rates of borrowing to kindle the economy through affordable consumption. Business investment in equipment and software has posted a remarkable recovery, which is expected to go on in 2012. Growth in the investments can be attributed to the availability of the opportunity of borrowing at attractive rates.

On the other hand, construction investment suffers immensely from the situation of the housing market. Because of this situation, business bankruptcies have been declining and are expected to decline by 10% in 2012. Because of the increasing external trade deficit, the government can adopt the policy of import substitution in those products, which it has capabilities in producing. Resulting from the drastic increase in gas and oil prices, the economy is facing inflation. A further increase in the price of oil could lead to an occurrence of a recession.

However, the Federal Reserve Chairman holds the possibility of a 3rd Quantitative Easing (QE3) in case there is such an occurrence, which can trigger QE3. With the current growth in the economy and shrinkage in unemployment, there is a possibility that QE3 could not be necessary since it can create inflationary pressures afterward. Hence, the monetary policy is currently strong, but QE3 could be possible if the oil prices continue spiking immensely (Stewart, 2012). The external trade currently remains in vast deficits.

The growth impulse contribution from the foreign trade was positive in 2011 but has turned negative from 2012. The risk for trade and current account balances remains remarkably strong under the grouping of the United States demand for imports, especially Japan, Europe, and China. Weaknesses in China, Europe, and Japan economies increasing the gap, and continued increase in oil prices have led significantly to the deficit within the OPEC nations. Because of the current issues in the economy, the government needs to employ expansionary policy (Blinder, 2011).

Aggregate Output, Unemployment & Inflation TrendHouse MarketTradeMacroeconomic Policy –Monetary ExpansionSource: U.S. Bureau of Economic Analysis.