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Reaction Paper - Essay Example

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1. Summary: Government forecasts, issued in June 2006, predicted that economic growth was sound and would increase, and that unemployment figures would drop during the year. These figures were better than previous forecasts, where the GDP had been estimated at 3.4 percent; the figure was now 3.6…
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Download file "Reaction Paper" to see previous pages... Inflation would be higher than predicted, and consumer prices would rise by 3 percent in the year, .6 percent higher than the previous forecast. The higher forecast reflected the rise in energy prices.
2. Economic Issues: These involved macroeconomic theories, and the article examined the economic growth figures and forecasts in order to determine the state of the economy,
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using GDP as a measure of that. In other words, the production and consumption based US economy was looking 'solid', suggesting a better standard of living for the population. But the unemployment figures of 4.7 percent and due to rise in the following year that were also discussed, meant that not everybody would benefit from expansion. Linked to the period of prosperity indicated by the GDP forecasts, was a rise of 3.0 percent in inflations, suggesting a cost-push inflation model, due to increases in producer's costs, in this case, attributable to rises in energy prices.
3. Policy Recommendations: To combat inflation and reduce unemployment, government intervention is required. This could include cuts in taxation, government spending, for example on armed forces and conflict involvement, a drain on any economy, and more investment in education, training, and technological advancement. ...Download file "Reaction Paper" to see next pagesRead More
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