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The microeconomic situation is currently depending on a number of factors some of which include interest rates, housing markets, consumer prices and debts among other factors. According to Chandan (2010), America holds a huge debt that is substantially growing and has continued to slow down the economy thus minimizing its growth as well. For as much as the interest rates are at present low, that does not help the economy to recover in a short-term basis, even though is may be necessary over long-term.
While low interest rates are associated with increased borrowing in the business realm as well as to encourage consumers searching for houses to borrow loans from banks and other financing institutions, it is inopportune that this is not the case in the United States. The defaulting rate is high and home seekers stay unwilling to take in more debt particularly at this time where there is a lot of uncertainty (Chandan, 2010). This is following the fact that assets may depreciate immediately it is purchased.
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In addition to this, America largely depends on foreign exchange to settle some of its debts i.e. government bonds are traded and purchased by foreign countries so as to enable the government to make money. However, the demand for US bonds is gradually decreasing as the country becomes so much in debt. Foreign countries doubt the validity of the economy and its capability to pay back (Chandan, 2010). Following the above discussion, it can be deduced that the current economic situation is worrying about recession.
So as to ensure that the economy quickly recovers from recession, the Federal Reserve and the US congress should maintain the current fiscal policy whose target and mandate is to maintain liquidity so as to make more money available to the system and corporation hence inspiring demand (OECD, 2008, p. 86). This way, production will be stimulated and the economy will be revived and prevented from recession.
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