ECO/372 Economic Advisements Paper
An advisory paper covering macroeconomic concepts and financial decision-making.
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RUNNING HEAD: Economic Advisements Paper
Economic Advisements Paper
ECO/372
Analyze the economic factors affecting the U.S. economy, including unemployment,
consumer income, expectations, and interest rates. Based on your analysis, provide
recommendations for addressing these issues and evaluate the effectiveness of
government intervention through Keynesian and Classical economic perspectives.
Word Count Requirement:
800-1000 words
Economic Advisements Paper
ECO/372
Analyze the economic factors affecting the U.S. economy, including unemployment,
consumer income, expectations, and interest rates. Based on your analysis, provide
recommendations for addressing these issues and evaluate the effectiveness of
government intervention through Keynesian and Classical economic perspectives.
Word Count Requirement:
800-1000 words
Economic Advisements Paper 2
Economic Advisements Paper
Analysis of Economic Factors
Unemployment
The unemployment rate for May 2013, the most recent month for which
statistics are available, was set at 7.6% (Bureau of Labor Statistics, 2013). Although
this is not as high as it has been in the past, it is still above the rate of 5.2%, which
Weidner and Williams state is the natural unemployment rate during a recession
(para 2). . Employment rose in the professional business service, food service and
drinking places, and manufacturing (Bureau of Labor. 2013). Colander states, “the
unemployment rate gives a good indication of how much labor is available to
increase production and this provides a good idea of how rapidly the economy could
grow (2010, p. 169). With the unemployment rate higher than what is ideal, those
without jobs are holding on to their money. This means less money in the economy,
which drops demand. With demand low, prices drop. However, because the
unemployment rate is barely dropping from month to month, American’s are not
able to react to the low prices by demanding goods, which keeps the economy in a
recession.
Expectations
Expectations play an important role in the state of affairs and present
conditions of the country. If we take the recent housing bubble bursting and the
resulting decline of the housing sector of our economy, prices have fallen
significantly, to the point that people cannot get mortgage loans because of the bank
Economic Advisements Paper
Analysis of Economic Factors
Unemployment
The unemployment rate for May 2013, the most recent month for which
statistics are available, was set at 7.6% (Bureau of Labor Statistics, 2013). Although
this is not as high as it has been in the past, it is still above the rate of 5.2%, which
Weidner and Williams state is the natural unemployment rate during a recession
(para 2). . Employment rose in the professional business service, food service and
drinking places, and manufacturing (Bureau of Labor. 2013). Colander states, “the
unemployment rate gives a good indication of how much labor is available to
increase production and this provides a good idea of how rapidly the economy could
grow (2010, p. 169). With the unemployment rate higher than what is ideal, those
without jobs are holding on to their money. This means less money in the economy,
which drops demand. With demand low, prices drop. However, because the
unemployment rate is barely dropping from month to month, American’s are not
able to react to the low prices by demanding goods, which keeps the economy in a
recession.
Expectations
Expectations play an important role in the state of affairs and present
conditions of the country. If we take the recent housing bubble bursting and the
resulting decline of the housing sector of our economy, prices have fallen
significantly, to the point that people cannot get mortgage loans because of the bank
Economic Advisements Paper 3
new criteria on lending. This was driven by the new expectation that the housing
industry has to regain the confidence of the consumers so that the housing demand
will rise one again which will in turn cause house building to resume and build up to
the level that it once was.
The automobile industry has taken a beating also in this slow moving
economy, which happened as a result a fall in consumer confidence, and
overproduction. Automobile manufacturers responded to the contraction in demand
by cutting back on production, thereby causing layoff, car dealerships to close, and a
loss in market share. In recent months however, automobile manufacturers have
restructured their organizations with the help of the government bailout and have
resumed production and have gained some of the confidence of the consumer to
start spending money again.
Consumer Income
Consumer income recently has been on a slow and steady pace from reports
of consumer spending in April. Oak (2013), “there was no change in wages and
salaries from last month, yet income assets increased 0.7%.” The problem with this
is that the majority of Americans cannot tap into that resource of income because it
is accessed heavily by a richer upper class on the inside track to the economic
trends. Americans who rent property have had to pay more in this past month due
to the 0.1% increase. This causes the average middle and lower class Americans to
tighten their belts further and contract their buying power while the upper class
made more money from that 0.7% boost in asset income.
new criteria on lending. This was driven by the new expectation that the housing
industry has to regain the confidence of the consumers so that the housing demand
will rise one again which will in turn cause house building to resume and build up to
the level that it once was.
The automobile industry has taken a beating also in this slow moving
economy, which happened as a result a fall in consumer confidence, and
overproduction. Automobile manufacturers responded to the contraction in demand
by cutting back on production, thereby causing layoff, car dealerships to close, and a
loss in market share. In recent months however, automobile manufacturers have
restructured their organizations with the help of the government bailout and have
resumed production and have gained some of the confidence of the consumer to
start spending money again.
Consumer Income
Consumer income recently has been on a slow and steady pace from reports
of consumer spending in April. Oak (2013), “there was no change in wages and
salaries from last month, yet income assets increased 0.7%.” The problem with this
is that the majority of Americans cannot tap into that resource of income because it
is accessed heavily by a richer upper class on the inside track to the economic
trends. Americans who rent property have had to pay more in this past month due
to the 0.1% increase. This causes the average middle and lower class Americans to
tighten their belts further and contract their buying power while the upper class
made more money from that 0.7% boost in asset income.
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Document Details
University
University of Phoenix
Subject
Economics