THE CURRENT MACROECONOMICS SITUATION
It seems that it is apparent that the current macroeconomics situation in US is bit difficult in numerous ways. The situation relating to employment, inflation, monetary and fiscal policies has been detrimental to US citizens who have undergone through an trembling economy for a lot of years. When there is enlargement in monetary activity, then the affluence will be experienced by a larger number of fiscal entities, in addition to industries, firms, workers, owners of capital as well as others. When there is a fall in fiscal activity, then the segment of companies’ encounters with decrease in production and further sectors of the financial system ...view middle of the document...
If the prices of commodities are sluggish to change, this will, sequentially, guide to a excess of production and firms will start on to discharge certain workers. So this brings unemployment.
Theories of New classical economics focus on the role of technology. When there is a slump in efficiency, firms will be incapable to manufacture as many commodities as they possibly will formerly. The plump down in employee efficiency leads firms to put off some workers in addition to a recession. New classical economists comprehend that technology not often decreases, but they indicate that power price increases in addition to tax hikes are over and over again indistinguishable in terms of their effects on firms. [Ghadiri Asli, B 1990] These are basic Macro theories, which would be explained further.
The Whole Circumstances : Basic Cause
Overflow of Credit
In the first place, it is necessary to understand that also today’s crisis was not something that appeared from a day to the another, but that it has been the result of different deeds and errors that have been done over the past few years in the capital markets in the United States, also worldwide. It started that these credits were provided to almost everyone in the U.S., also to the one who receive the very less wage in order to purchase or build real estate.. During that period there was a huge real estate boom in the US, so that these credits, which gone down, were still attractive. Here the house was sold for a higher price and because of that it came to a higher return than the actual credit.
In 1929 Due to the presence of loan for stock-market operations, the low level of margin requirements (the requirements for initial payments on stock purchases) and the sharp lifting force of stock prices investors were able to rise their number of shares without expending any further amounts of their own funds.
Unemployment, Inflation & GDP The rate of unemployment has gradually gone down in last three years. The estimate shows that it was 9.1% in January 2011 which has dropped down to 6.6% in January 2014. Surprisingly it was almost 10.5% in the later part of 2009. The anticipated unemployment rate would be around 4% with full employment. But in fact in last few years the US economy has seen a historic upset as far as unemployment is concerned. But, the unemployment rate is merely one part of the whole scenario of the US macro economy.[ Blanchard, O. Zobeiri, H 2009]
The rate of inflation is also one other major factor that has been in news from last few years. As price levels augment for goods and services, the US currency is now less powerful and buys less, resulting in a quantifiable inflationary rate. In December 2013 it was 1.5% which actually has plunged down from 1.6% in January 2011. Though, a minor change, but still extremely satisfying during present tough times. It was recorded the highest in September 2011 with almost nearing to 3.9 %. [Blanchard, O. Zobeiri, H 2009]