Our Economic Future

Satisfactory Essays
Our Economic Future

When I first decided to take this class I felt there was not much that when into the predictions of stock prices and the future of your economy. It is clear now that there are at least six different factors that contribute to the movement of our capital markets. At the present time our market is in what the experts call a correction period which means that it has fallen at least ten percent from a record setting date. Our economy is mist of a record boom of a one hundred and seven months. Experts a predicting the worst like they have the last twenty-four months or so. So I am going to make a prediction that the economy will continue to grow at a rate of 3.5% maybe not at the same rate as last year.

The Federal Reserve is trying to slow the growth by raising rates by a quarter of a point. The rational for this is that the economy is growing at a rate that can spark inflation soon. So far the prior four times the Federal Reserve has raised rates not much has happened. I am predicting that if the current rate hike does not effect the market, Federal Reserve Chairman Alan Greenspan will raise rates again in March and May to slow our prosperous economy.

The reason why a rate hike will slow down the economy is by raising the overnight rate to 5.75, the highest since 1995, it has made borrowing less attractive. In turn, corporation will have less money to invest then productivity will go down, hence supply will go down and demand will soon follow. Right now though productivity numbers released in January showed that it is on the rise, which has keep inflation in check. As productivity is on the rise, corporations are going to require more labors. Unemployment is at an all time low of 4% and is not expected to increase much this year, levels are predicted to be between 4.0-4.25%.

The rise in labor productivity will lead to less unemployment, which leads to a higher economic capacity and more money circulating in the market. With a rise in capacity there will be a rise in supply. Corresponding with this rise in supply there will be more money circulating there will be a rise in private domestic demand.
Get Access