2: The Fiscal and Monetary Policy and Economic Fluctuations - Assignment Example

Inflation has steadily increased in the last 5 years in the United States. This can be seen in the way personal expenditure has increased since 2009. According to the U.S.A Department of commerce: Bureau of Economic Analysis; personal expenditure was about 9800 USA dollars in the year 2009 and has increased over the past few years to 10600 USA dollars in the year 2012. Over the last five years, interest rates have highly declined. This factor has encouraged borrowing in the USA leading to more expenditure by the public.

Employment rates have also increased over the last five years. Though not steady, its indication of economic development can never be sidelined. Though not at the expected rate, it is evident that the US economy has been growing. Despite the unsteady economic growth, it can be noted that the inflation levels have been steadily increasing over the last five. The buying power of the US dollar has been slowly decreasing while prices for goods and services have also been increasing. The increase in inflation can be because the increase in the cost of production.

This leads to higher market prices, which can clearly mean that people are forced to pay more for services and goods. This can also be due to the increase in raw material prices and government policies. The decrease in interest rates might have been caused by the low rate of public borrowing then. This action is always taken with the aim of increasing the rate at which people seek credit services from financial organizations. As a result, the economy is likely to have more money being invested in the country.

This would impact the country’s economy positively. Decrease in interest rates also gives the public more purchasing power. The decrease in unemployment can be credited to both increase in gross exports and the increase in gross private domestic investment. This