The Current Economic Situation in the United s and its Solution The Current Micro Economic Situation in the United States and its Solutions Introduction According to Arnold (2008), economics is the science of how the society and human beings use the limited resources so as to satisfy their unlimited needs. Economists are charged with the responsibilities of addressing the issues that relate to: the economic growth rate, Rate of inflation and the Employment rate (website). Economics is categorized into: Microeconomics and Macroeconomics. Colin (2009) notes that Microeconomics deals with how individuals behave as they relate to smaller units for example a firm or industry.
Macroeconomics deals with individuals behave as they relate to the larger units for example an economy. The current microeconomic situation in the United States Arnold (2008) emphasis that the United States of America has several issues to deal with due to the economic crisis experienced in the year 2008. It brought about a number of issues which include; inflation, unemployment, gross domestic product and the stability of the financial system. Unemployment refers to the number of people who are seeking employment it also includes those in part time employment but are still seeking employment.
Since the recession in December 2007, the number of unemployed people has more than doubled in the United States. The unemployment rate is expected to grow to 8.6% up from 8.0% (Website). If people do not buy commodities, the producers are forced to reduce the rate of production. If production is decreased the workers are also going to be decreased which results to unemployment. According to Arnold (2008), inflation refers to the general increase of commodity prices.
It s measured using the Consumer Price Index and the Gross Domestic Product. The consumer price index uses the consumer prices while the Gross Domestic Product uses the whole domestic economy. According to Colin (2009), recession is characterized by low economic activities including low production, low household income and low inflation while there is an increase in debts and rates of unemployment. Due to recession there is low spending by individuals which ultimately affect the production of commodities. What the United States is doing to curb the Crisis The United States government has a plan of reducing unemployment rate by 0.2% by the year 2012.
This is to be done by reviving the economy by spending money in the health sector and in renewable energy. The unemployed people will get social assistance from the government (Website). Arthur (2008) notes that the monetary policy refers to the actions taken to control the amount of money in circulation; it is undertaken by the Federal Reserve. This is done using three main tools; open market operations, discount rates and reserve requirements.
According to Colin (2009), open market operations relates to the buying and selling of the United States government securities which affects the interest rates to be charged. The United States terminated the sale of financial stocks so as to address the mortgage crisis The discount rate is the interest rate charged by the Federal Reserve banks to banks, on short term loans. Reserve requirements refer to the amount of funds that are physical that financial institutions are expected to hold (Arthur, 2008). These have generally been decreased so as to address the shortage of the dollar.
Colin (2008) claims that fiscal policy refers to actions the government puts in place so that it can monitor and check on its economy for example taxation and public spending. The government has decreased taxation so as to encourage consumers spending and increase governments saving. This in turn will reduce the unemployment rate and improve the economy. References Arnold, R. (2008). Economics. Mason: South-Western Cengage Learning. Colin, M. (2009). Global financial meltdown: how we can avoid the next economic crisis. New York: Palgrave Macmillan.