The United States Current Macroeconomic Situation Andrew Tilton (2011), the Senior US and Canada Economist believes that America’s economy is getting stronger after the global financial crisis. He contends that core inflation would continue to be low for the following months and that increased interest rates will not hinder the full recovery…
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This means that the people in America were borrowing in order to fund spending (Tilton, 2011). A deficit then is created. This situation is expected to result into inflation. Nevertheless, as of 2010 until the present, the private sector’s spending has been in moderate level (Tilton, 2011). There is a rise in saving and a drop of spending (Tilton, 2011). The country’s GDP (Gross Domestic Product) is used to determine this fact. Second, credit conditions have improved for both smaller businesses and individuals; more and more banks have stabilized their lending standards (Tilton, 2011). This means that banks are not anymore imposing strict policies in terms of lending. If this is the case, then, it would be easier for smaller businesses and consumers “to spend a bit more” (Tilton, 2011). Despite these good economic findings, there are three key factors which could hinder full economic growth in the United States. These are the following: (1) large federal budget deficit; (2) large increases in commodity prices; and (3) weakening of housing prices (Tilton, 2011). To prevent these factors from becoming a big economic problem, the federal government should adopt fiscal tightening instead of fiscal expansion. At this time, to use an expansionary fiscal policy would worsen the situation.
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