Essay #1 The current state of our economy is facing numerous threats and problems. For example, the recent crises in Middle East which caused oil price shock imposes a threat to our weak recovery. Another problem is the weak recovery. We are experiencing the weakest recovery on record for the United States. Last quarter’s advised GDP growth was only 2.8 percent. This is far below the average 5 or higher percent growth rate after recession. The weak recovery has been a major reason of another big problem for our economy—the job market. Unemployment rate has been staying at wildly 9% and above and there isn’t a sign of strong rebound in the foreseeable future in the job market. While all these are big problems that our economy is facing, I will argue that the real and the biggest problem lies in the financial market. Specifically the banks which are holding excess reserve, or not lending which caused a reduction in both consumption and investment is the fundamental problem in our economy. The reason that financial market is crucial for the economy is because they are responsible for channeling funds from savers to borrowers. The borrowers then either consumer the money today or make investment.(Borrowers typically do not just hold their borrowed money, otherwise they don’t need to borrow) The interest rate precisely determine how much an individual would consume and save and how much borrower would borrow because the interest itself is determined by the force between supply(savers) and demand (borrower) for the fund. Together, the interest rate determines the amount of savings and disavings and the well functioning financial market channels the money from savers to borrowers which eliminate what Keynes was so afraid of—not consuming enough or savings. The borrowed money that is used for investment is especially important for the economy because investments are important for economic growth and innovations. The financial intermediaries and especially banks are the ones who brought us into the recession and they are also responsible for the weak recovery. In short, the banks are sitting on huge excess reserve, or simply not lending. Falling housing prices which might cause banks to incur huge loses, higher default risk on loans during recession, and poor balance sheet from the crisis are the main reasons why banks aren’t lending. This led to what Keynes was so afraid of—savings. Because when banks are not lending, the flowing of funds from saver to borrowers reduced sharply or even stopped. This really hurts the economy because both consumption…
the fund rate has been down to zero since then. The unemployment rate has kept rising from under 5% to more than 10% and back to 8.3%. The F.E.O said, 8.3% was great and QE has been effective. The dollar has been devalued more than 40%, but the deficit current account has been solved. The economy shrank to negative figure, but improved within a year. Now we have slow growth and inflation. The economy of the United States ia a mixed economy and has maintained a stable overall GDP growth rate, a moderate…
Unemployment is defined of those who are of working age and are actively seeking employment but do not currently have a job. It can be calculated using the ILO labour force survey or by looking at the claimant count. There are two major causes of unemployment, that caused by low aggregate demand and that caused supply problems in the economy.
One obvious cause of supply related unemployment is structural unemployment caused by immobility of labour. This unemployment results because although jobs…
Macro Economics Chapters 6 & 7
Cost-push inflation Increases in the price level resulting from an increase in resources costs and hence in the per unit production cost.
Demand-pull inflation Increases in the price level caused by an excess of total spending beyond the economy's capacity to produce.
Frictional unemployment is caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between…
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Economics Revision Focus: 2004
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Revision Focus on Unemployment (AS)
AS Syllabus Requirements Employment and Unemployment Candidates should…
is to manage the nation's money supply, also known as the monetary policy. Central banks achieve this by managing a state’s currency, supply of money and the interest rates. Central banks usually print the national currency and can increase the amount of money. Interest rates can be adjusted accordingly in order to promote economic growth and stability. The tools used by central banks are all used under the implementation of the monetary policy. Central banks can also lend money to the banking sector…
1. Describe the recent rate of unemployment and how it has changed over the last year.
According to the bureau of labor statistics, as December of 2014 the employment rate in the U.S reached 5.6%, when compared to of December 2013 we have seen significant drop as it was 6.7%. Within the last 5 years, this is the lowest unemployment rate we have seen, the highest unemployment rate in the US was back in October of 2009 when it was 10% and California was 12.1% (Bls.gov, 2015).
2. Explain what has…
CHAPTER 35 MULTIPLE CHOICE 1. The natural rate of unemployment depends upon: a. the rate of growth of the money supply c. the inflation rate b. the interest rate d. none of the above
ANS: D 2. In the long run, the actual inflation rate depends primarily on: a. the expected inflation rate b. the Phillips curve trade-off c. the rate of growth of the quantity of money d. the unemployment rate
ANS: C 3. The Phillips curve implies that the economy faces a: a. long-run trade-off between price inflation…
As a member of the World Bank, it is important to know how the different aspects of the global economy are functioning. The different aspects are quantities of specific goods and services, Gross Domestic Product (GDP), unemployment, and inflation. The area the World Bank is focused on is South America. This report will concentrate on unemployment in Colombia.
The economy for every country is very similar…
things about the area. I would look at the countries unemployment rate, this would help me see the chances of me getting a job out there. What is the cost of living relative to wages? If wages are lower than the cost of living, then you don't want to live in that country. If wages are high relative to the cost of living, then you may want to move to that country. Also Is the economy strong enough to have foreigners?
6. I think the best economic system is mixed. Mixed contains both privately-owned…