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Inflation, unemployment and economic growth
Inflation, unemployment and economic growth
Inflation, unemployment and economic growth
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The global economy was relatively doing fine more than five years ago before it was hit by economic downturn or recession. During this period, the American economy was at its peak, particularly in the fourth quarter of 2007. However, this was followed by a mild recession at the beginning of 2008, which eventually turned into a severe credit crisis across the world approximately one year later. While only a few countries escaped the economic recession, virtually no country could avoid the severe bear markets in stock (Norris, 2012). Some countries like the United States experienced changes in gross domestic product and stock markets. Since it has the best record of the main developed countries, the United States was severely affected by the recession. As the economic downturn came to end, America started the process of recovery from the effects of the recession. This recovery process has been characterized by changes and economic fluctuations in various aspects including interest rates, unemployment rate, and inflation within the past five years.
Current Economic Situation in the U.S.:
As compared to five years ago, the U.S. economy has been resilient as it continues to recover from the effects of the economic downturn and ruins to an improved health. Currently, the country’s economy is weathering federal budget reductions and higher payroll taxes. Moreover, economic growth is picking up to an extent that some economists predict that the already five-year expansion may last longer (Klimansinska & Chandra, 2013). The signs of U.S. economic resilience are evident across the board such as continued spending by households, rebound of home sales, increased investment and hiring by businesses, and the surge in the automob...
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...me. On the other hand, tax cuts contributes to an increase in interest rates and inflation rates since people would have more money and not be afraid of spending it. As a result, businesses and companies will carry out more investments into the economy as demand for products and services increases.
In conclusion, the United States economy has experienced tremendous changes in the past five years to an extent that it’s showing resilience. The current economic sate is characterized by slow growth as the country recovers from the effects of the 2008 economic downturn. However, the inflation rates, interest rates, and unemployment rates are still below par with regards to promoting economic growth. Therefore, the government should consider adopting tax cuts and raising the minimum wage in attempts to encourage people to spend money to stimulate economic growth.
The financial crisis of 2007–2008 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This crisis resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis led to a series of events including: the 2008–2012 global recessions and the European sovereign-debt crisis. The reasons of this financial crisis are argued by economists. The performance of the Federal Reserve becomes a focal point in this argument.
This paper aims to discuss the Short-Term and Long-Term Impacts of the Great Recession and
As a result of the Great Recession of 2007 to 2009, the United States government implemented various fiscal policies in an effort to stimulate the economy. How the government responded as well as how those responses will affect the U.S. economy into the future are the focus of a proposed research study. In order to ensure an appropriate focus for the proposed research study, problems in existing literature must be evaluated.
Since being founded, America became a capitalist society. Being a capitalist society obtains luxurious benefits and rather harsh consequences if gone bad. In a capitalist society people must buy products and spend money to keep the economy balanced, but once those people stop spending money, the economy goes off balance and the nation enters a recession. Once a recession drastically takes a downturn, the nation enters what is known as a depression. In 2008 America entered a recession and its consequences were severe enough for some people, such as President Barack Obama, to compare the recent crisis to the world’s darkest economic depression in history, the Great Depression. Although the Great Depression and the Great Recession of 2008 hold similarities and differences between the stock market and government spending, political issues, lifestyle changes, and wealth distribution, the Great Depression proved far more detrimental consequences than the Recession.
It can be argued that the economic hardships of the great recession began when interest rates were lowered by the Federal Reserve. This caused a bubble in the housing market. Housing prices plummeted, home prices plummeted, then thousands of borrowers could no longer afford to pay on their loans (Koba, 2011). The bubble forced banks to give out homes loans with unreasonably high risk rates. The response of the banks caused a decline in the amount of houses purchased and “a crisis involving mortgage loans and the financial securities built on them” (McConnell, 2012 p.479). The effect on the economy was catastrophic and caused a “pandemic” of foreclosures that effected tens of thousands home owners across the U.S. (Scaliger, 2013). The debt burden eventually became unsustainable and the U.S. crisis deepened as the long-term effect on bank loans would affect not only the housing market, but also the job market.
Many people against raising the minimum wage create arguments such as, “it will cause inflation”, or, “ it will result in job loss.” Not only are these arguments terribly untrue, they also cause a sense of panic towards the majority working-class. Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has consistently increased, even when the wage has been
With the after effects of the stock marketing falling in 2008, and less investments involving risk and the GDP falling. This is when the economy began turning internationally. With imports, exports and foreign investment falling along with the combination of employment and production being cut back this recession affected the global economy. The unemployment rate in the United States began to skyrocket as well. Below is a graph depicting the unemployment rate in the United States during the 2008 recession. This graph data is from Oregon Economic Crisis Analysis.
In 2009, the United States economy began to recover from the Great Recession. To aid in the recovery, the newly elected president Barak Obama created the American Recovery and Reinvestment Act better known as the second of two “Stimulus Packages.” Pa...
The first article about the recession was titled, “Calls for Tax Cuts and Money Ease.” The editor of this article sees unhappy and disappointed about the economy and ford handling of it. He talks about when Ford moved into the white house, “ he promised to take control of federal spending which he regards as the principal on inflation.” The editor explains the country and congress disagree with Ford decision to cut spending and believe he should cut taxes to help the people that are struggling.
It has been 5 years now, but the world economy is still hovering over with ill effects of global economic recession. Different economist define recession in a different way but one common definition which can be derived is that recession is long lasting and prime reason for slowdown to economic activity(GDP). In terms of measuring the effects of recession, the broadest indicator of economic activity is real gross domestic product(GDP). Our following section will discuss how the economic activities in US has actually decreased since the beginning of market turmoil.
What caused the Great Recession that lasted from December 2007 to June 2009 in the United States? The United States a country with abundance of resources from jobs, education, money and power went from one day of economic balance to the next suffering major dimensions crisis. According to the Economic Policy Institute, it all began in 2007 from the credit crisis, which resulted in an 8 trillion dollar housing bubble (n.d.). This said by Economist analysts to attributed to the collapse in the United States. Even today, strong debates continue over major issues caused by the Great Recession in part over the accommodative federal monetary and fiscal policy (Economic Policy Institute, 2013). The Great Recession of 2007 – 2009 enlarges the longest financial crisis since the Great Depression of 1929 – 1932 that damaged the economy.
One way raising minimum wage will be beneficial is that it could lift many Americans out of poverty. Raising the minimum wage in Illinois, would help the families of more than 1.1 million workers who work to meet their children’s basic needs and “reduce the adverse effects of poverty on a child’s well-being” (Fiscal Policy Center). Studies have shown that raising the minimum wage would help 1 in 5 Illinois families who are in poverty. By raising the minimum wage in Illinois, it would help workers with families spend money on food, housing, gas, and other needs without going into poverty. Along with puling Americans out of poverty, raising the minimum wage could also stimulate economic growth. Raising the minimum wage, is stimulating economic growth by worsening the income inequality and substantially reducing the employee turnover for the business. Increasing a person’s income would raise their yearly earnings by $3,640 and “Improve the economic security and reduce the economies poverty rate” (Fiscal Policy Center). Low-wage workers spend most of what they earn on their basic needs, which is quickly spent and does not leave the worker with much money left to spend on other needs. This boost in the minimum wage will stimulate the economy and help create opportunities for more people, by hiring more workers to keep up with the
" The US Economy. N.p., 31 Oct. 2012. Web. The Web. The Web.
In time of economic crisis the government has a choice to cut spending or increase spending for public goods and services. “In 2009, Congress passed the American Recovery and Rein- vestment Act, which authorized $787 billion in spending to promote job growth and bolster economic activity”(Stratmann/Okolski 3). John Maynard Keynes, an economist of 20th century, suggest that the government should run a deficit if it will create jobs and increase capital gain. This theory support the current stimulus package that has been introduce during President Obama’s term. Although the flaw with this concept is that it makes the assumption the government has done studies and understands which areas needs the funding the most and knows where it will be beneficial, realistically that is not true. “Federal spending is less likely to stimulate growth when it cannot accurately target the projects where it will be most productive” (Stratmann/Okolski 2). This can be seen because political figures will spend money where it directly supports their needs as well. For instance, the political figure would rather spend money to things that will yield a p...
In our opinion government spending is better than tax cuts. Government spending increases the employment as well as the income of the people of the country, though tax cut only increases the wealth of the people who may not spend the extra money earned and help in the growth of the economy.