Fiscal and Monetary Policy and Economic Fluctuations

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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...

... middle of paper ... 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.
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