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At present, the rates of interest are aid to be the three-quarters of one percent lessened resting at 0. 25% as per the Fed. As per the Consumer Price Index (ICP) the procuring power of the dollar has grown over the previous five years. 2008 saw the buying power of a dollar had the same value. However, that same dollar possesses different buying power in the year 2013. The dollar’s purchasing power bill in 2013 is currently worth $1. 08. The present situation of the economy in the United States is that the unemployment is continuing at its original rate.
The economy is constant to progress since the time of recession but, at a lesser rate than what society mingle expects. According to Time Business & Money, the growth rate of the economy did not exceed than 2. 25% and in the fresh quarter it has gone down a per cent. Although the economy has been rising at a minimum rate, but steady unemployment level decreased during this process. The new job rates that are being summed up to the economy is less of what is required to pull down the unemployment at a rate that is acceptable (Floyd Norris, 2012). According to the Bureau of Labor and Statistics U. S.
Department of Labor the present unemployment rate is 7. 3%and the unemployed resting at 1 1. 3 million is yet large amount of U. S. Citizens being unemployed. Five years back in 2008 the unemployment rate ranged between 6. 3% and 6. 5% of 10. 1 million U. S. Citizens unable to find a permanent employment. As per The Economic Policy Institute the private sector suffered the hardest as far as holding reductions (lay-offs) between December 2007 and November 2008 totaling job losses of U. S. Citizens at 1. 2 million employees being laid off. Explain the changes in interest rates, inflation, and unemployment rates which your research yielded.
Explain one reason for each of the changes in interest rates, inflation, and unemployment tastes that you identified in Question 1. I will start by discussing the transitions in the interest rates in last five years and what were the supporters of the changes. Interest rates firstly switched in an effort to drive out the economy of the recession post housing bubble burst. The rates of interest continued to remain flat from 2008 until the present day in 2013 (Floyd Norris, 2012). The thought of keeping the interest rates less was to augment the consumers’ buying power, and this would invite more revenues to the economy.
With the income generation, a chance to create fresh jobs would support in reducing the employment level of the United States. Present times broach that the interest rates won’t remain less and that an augmentation of interest rates should await. With the consistent economic growth, interest rates increase, this would be better for the economy. The later topic that of discussion is the transitions in the rates of inflation over the past five years. There has been an 8. 5% rise shift over the past five years providing consumers additional buying power. The present state of the economy deals with a decrease in the cost of living.
The decrease in cost of living is a circumstance that the US. As not witnessed in the past four years and has been a contributor to consumers spending rises. Identify two (2) strategies based on fiscal and monetary policy that would encourage people to spend money in order to create economic growth. I will start by stating fiscal and monetary policy. “Fiscal policy is defined as the changes in government taxes and spending that affects the level of GAP. Monetary policy is defined as the range of actions taken by the Federal Reserve to influence the level of GAP or inflation” (Sullivan, 2014).
The foremost strategy is about fiscal policy impact n consumer spending. The initial approach would be government tax curtails, which raise the consumers’ buying power. These tax cuts let families keep their additional income and in return forms opportunities for spending money on the services and products helping in revenue generation leveraging the economy (Peter Ferreira, 2013). A further part of the government strategy is they disbursing on infrastructures inclusive of the construction of schools and roadways. The new construction introduces employment opportunities, which will help to drive the unemployment rate low.
It also leverages the economy from the revenues generated from the fresh job creations. According to the Investigated, the fall in taxes supported by government dispensing is a strategy known as “pump- priming. The strategy of monetary policy is the way government makes use of the Federal Reserve Bank to manipulate the amount and manner of cash supply management. This supports control the inflation rate that the U. S. Manages to maintain the rate between 2% to 3% (Norris, 2012). Explain how the (2) strategies that you identified in Question 3 could affect the unemployment, inflation, and interest rates.
These strategies will help in reducing the negative impacts on inflation, rates of interest and unemployment. Government disbursing assists in reducing unemployment by dispensing revenues on the infrastructures. This opens up jobs far and wide in the country with a positive impact on the issue of unemployment. Hence, the government disbursement is a major factor in job creation (Stephanie Powers, 2014). The Federal Reserve Bank manipulates the cash flow that controls the economic progress. This supports in determining the inflation rate managing the cash amount in the economy.