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2008 became the turning point in the economic history of the United States and the rest of the world. The failure of the real estate and financial markets caused profound negative impacts on the global system of economic and financial relations. Before 2008, the stability of the American economy had been beyond doubts. Today, America is fighting to overcome the tragic consequences of the recent financial turmoil. According to Chan (2011), the 2008 financial crisis could have been avoided. However, it is too late to develop preventive strategies and measures. More important is the fiscal and monetary future of the U.S. economy. The current macroeconomic situation suggests that the U.S. is still in the state of recovery, and only supportive/ expansionary fiscal policies and discount rate changes can create the ground for the subsequent restoration of the American and global economy.
The current macroeconomic situation in the United States is optimistic but complex. 2011 witnessed a 3.9% increase in GDP, compared to 2010 (Bureau of Economic Analysis, 2012). The most significant were changes in the consumption of durable goods and fixed investments, a 16.1 and 22.1 percent increase accordingly (BEA, 2012). In 2011, the Consumer Price Index increased to 2.9 percent (Crawford, Church & Rippy, 2012). The rates of unemployment did not change: today, 8.3 percent of the U.S. worforce are without long-term employment (Bureau of Labor Statistics, 2012). In February, nonfarm employment increased by 227,000 (BLS, 2012). Even then, the situation with employment remains extremely complicated (BLS, 2012). In light of reduced government expenditures, it comes as no surprise that the United States cannot overcome the troubling recessionary trends.
Since 2008, the United States has improved its economic standing. Nevertheless, the country is still in the state of recession. Sluggish economic growth and failure to create new jobs suggest that only expansionary fiscal policies and discount rate changes can create the foundation for the subsequent restoration of the American and global economy. Expansionary fiscal policy presupposes increasing government expenditures and/ or reducing the burden of taxes on individuals and organizations. Last year, the U.S. government reduced taxes for the wealthiest U.S. citizens (Frank, 2012). Despite the fact that most citizens favor higher taxes for their wealthy counterparts, relaxed taxes can provide the freedom and opportunity needed to restore the U.S. economy (Frank, 2012). Lipsky (2011) suggests that the expansionary fiscal policy has already saved the country from a deeper recession. Today, the expansionary fiscal policy should be further supplemented by changes in discount rates. The Federal Reserve (2012) defines the discount rate as “the iinterest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility.” This type of monetary policy will increase the availability of cheap money, expand and stimulate consumer spending which, in turn, will increase business revenues and create new jobs.
In the middle of March, 2012, the FOMC released the statement that acknowledged the slow but continuous improvement of the economic conditions in the U.S. (Fontevecchia, 2012). Today, only rising oil prices can boost inflation and slow down the economic and financial progress made by the U.S. in the past three years (Fontevecchia, 2012). However, that the country is making a slow progress does not mean that sophisticated economic policies are no longer needed. On the contrary, it is high time for the American government to support the national economy in its movement to the pre-crisis state.
The current macroeconomic situation in the U.S. is optimistic but complex. High rates of unemployment and failure to create new jobs slow down the country’s economic progress. Expansionary fiscal policies and changes in discount rates could support the country in its movement to the economic revival. It is high time for the American government to support the national economy in its movement to the pre-crisis state.