ECO 372 Week 3 Learning Team Assignment Weekly Reflection
ECO 372 Week 3 Learning Team Assignment Weekly Reflection
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Date Created: 11/06/15
Running head Aggregate Demand and Supply Aggregate Demand and Supply ECO372 Running head Aggregate Demand and Supply 2 There are many economic factors that can be used to evaluate the state of the economy at any given time Some of the factors that would be useful to critique the American economy now would be unemployment expectations consumer income and interest rates In this paper those four factors will be used to both describe and evaluate the economy of the United States The unemployment rate is the number in the civilian labor force divided by the number of unemployed However to be counted in the unemployment rate a person must be without a job and actively looking for work in the last four weeks For those who have given up on finding employment are not counted in this figure There is argument on this figure because people say the real unemployment rate is much higher and should count those discouraged workers With this in mind also know the unemployment rate can be a validation of what the other indicators show If other indicators show the economy is on the rise and the unemployment rate is falling it is proof that people are finding jobs because business owners are convinced the economy is starting to grow and they can start hiring again The unemployment rate has decreased to 83 in the United States as of January 2012 this is the lowest since February 2009 Trading Economics 2012 Running head Aggregate Demand and Supply 3 WHITE39 HATES lIIIHEMPL I39H39IEHT FMTE v r r BE Panamage if D E La Em Ful ll3E 1 1 D f E x Jquot K E g j x 925 95 g BaffinEFF P r3939kr IIII 9 Iranquot K REE 525 a 5 HR 39I I 39 I I JuL Jantr 1 1 JuLH1 Jantr 11 51L REE nEtEZ il n lh WE RE SLHELi al 1F L inilL EquotATLE CE The current state of expectations of the United States economy is not a good one The expectations include keeping a cap on the federal funds rate the in ation rate and the unemployment rate The federal funds rate is the rate one bank can loan to another This rate will remain low until the economy can gain some ground The in ation rate is on the rise because the lack of jobs and the slow way of Americans spending their money In ation makes goods and serVices costs more than they were before the recession The in ation rate causes banks to not lend as much money to consumers The eXpectations of the in ation rates are that they continue to rise as long as the recession is happening The unemployment rate is eXpected to until to rise also based on the recession The nation will continue to have high and unheard of unemployment rates as long as the economy is in a recession The eXpectations for this economy do not show any signs of improvement for several years We shall remain in this holdings pattern for at least 18 to 24 months Within this time the global economy will show signs of growth that will help the United States economy Running head Aggregate Demand and Supply 4 Consumer income is the amount of money one receives from their check after taxes Income is used to pay bills and provide for oneself or their family The current state of consumer income is not what it should be Since the recession and during the economic recovery consumer income has declined showing very little signs of recovery The annual household income has declined 98 between 2007 and 2011 Kapitall Lipman 2011 Consumers are taking jobs that pay significantly less than what they were being paid before the recession The aggregate demand and supply is affected by consumer income because consumers do not have enough income to buy everything they need and want Retail stores are not buying as product to sell to avoid a larger loss of profit However some retail stores such as Luby s Charming Shoppes and Hot Topic were reported to be doing better than eXpected during October 2011 Kapitall Lipman 2011 Consumer income could be in a better state over time as long as the economy continues to get better Interest rates play an important role in the American economy and changes to the interest rate can lower in ation and stimulate the economy but it could even have uneXpected outcomes hurting the economy more The best thing for the US is to keep the money owing and interest rates control the ow of money Amadeo 2012 In recent years the United States has suffered economic disasters of credit crises American history will show an average interest rate of 645 but since 2010 the interest rate has hit a historical low of 25 and the Fed does not plan to change this until late 2014 TradingEconomics 2012 This is in attempt to maintain a sustainable economic status United States financial factors are in a gray area at best and the Fed must maintain a Running head Aggregate Demand and Supply 5 close watch on changes in the economy affected by the current interest rate and maintaining consumer confidence is a must to eXpect positive number in the stock market The existing fiscal policies of 2012 recommended by our government leaders are conventional The government is trying to stabilize the economy by adjusting the levels and allocations of taxes and the government spending The fiscal policy today is trying to stimulate a failing economy by adjusting the levels of federal taxation and spending policies designed to level out the business cycle and try to get to full employment price stability and continuous growth in the economy This policy aims to stimulate demand and output by increasing government purchases and cutting taxes so this releases more disposable income into the spending stream Fiscal policy today is managed independently of monetary policy this is where the Fed tries to regulate economic activity by controlling the money supply The goals of fiscal and monetary policy are the same but approach to it is different when using the Keynesian and the Classical model perspectives Classical economists believe that the economy would forever achieve full employment by forces of supply and demand These economists believed in the self adjusting market mechanism It was important for the working of the market mechanism that a perfect competition in the market eXisted and that wages and prices were also fully eXible Monetary policy would not affect real factors like output or employee Fiscal policy to a classical economist was looked at as damaging The recommendation of a Running head Aggregate Demand and Supply 6 classical economist is not to use monetary or fiscal policy by the government This policy recommendation is known as the laissez faire Colander 2010 The Keynesian economists believe that people who have incomes demand goods and services and this in turn helps create jobs The government sound increase spending thereby generating jobs and income for people employed on the government projects This would create demand for goods and services of the private employment sector of our nation Colander 2010 Keynesian economists believe that the government should use fiscal policy to make up for the shortfall of the private sector aggregated demand so it can stir up job creation in the private sector In conclusion the four factors considered reveal that the economy is damaged but shows some signs of slow recovery While eXpectations and consumer income are not in very good shape at the moment the unemployment rate is improving and interest rates remain low creating an environment that promotes growth So while the state of the economy could certainly be better there are signs that things are improving Running head Aggregate Demand and Supply 7 References Amedeo K 2012 A primer on the role of interest rates in the economy National Osteoporosis Foundation Retrieved from httpuseconomyaboutcomodinterestrateindicatorspinterestratehtm Colander D C 2010 Macroeconomics 8th ed Boston MA MCGraW Hill Kapitall Lipman R 2011 Studies Show Consumer Income in Greatest Decline After Recession Retrieved from http wwwfoolCominvestinggenera1201 1101 1studies show consumer income in greatest decline aast Trading Economics 2012 United States Unemployment Rate Retrieved from httpWWWtradingeconomicsComunited statesunemployment rate httpuseconomyaboutcomodeconomicindicatorspunemployratehtm Trading Economics 2012 US Fed said no rate hikes until at east late 2014 Retrieved from httpwwwtradingeconomicscomunited statesinterest rate
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