The Economy, Monetary Policy, and Monopolies - Essay Example

ming more expensive, the dampening of consumer demand for loan products such as mortgages as well as affecting the prices of residential real estate negatively. The rise in interest rates in the last five years can be attributed to the fall or rise of the money in circulation which has been common in the United States in the recent years. Increases rates have, in turn, led to inflation in the economy (O’Sullivan, Sheffrin and Prerez, 82). Looking at the United States economic situation in the last five years in terms of inflation, interest rate and employment, questions have to be raised on what has been referred as the ‘greatest economy’.

In the last five years, the interest rates in the USA have gone so low and this can be seen in the spike of the houses on sale. This condition has led to federal budget balance weakening to an extent that has never been witnessed for decades. This implies that the economy of the nation is completely off track. The rate of unemployment has rises from 4.5 % in 2007 and is now at 8.1 % (O’Sullivan, Sheffrin and Prerez, 78). High employment rates is one of the major indicators of how any economy is fairing and with the number of people actively looking for jobs increasing in the United States, the economy can be viewed as attenuating.

This means that even businesses have lost the confidence of hiring employees again. In an effort to create more employment opportunities, the federal government permitted rapid credit expansion. This led to the central bank to adjust its monitory policy following increased inflation at that time. This effort slowed the money supply growth thus checking on the unemployment levels. The other step by the federal government to check on unemployment rates was through the introduction of a fiscal policy that was intended to stabilize the economy (Beardon, 18).

The policy achieved this through cutting down on taxes as well as increasing spending. The policy also impacted the interest rates and the