The Fiscal and Monetary Policy and Economic Fluctuations - Essay Example

It is estimated to be a fifth of the universal total. The country also has a mixed economy and has sustained a steady Gross Domestic Product rate of growth, high levels of research and capital investment, and moderate rate of unemployment. The current economic situation in America is evidently different from the economic situation five years ago. The present Federal Reserve interest rate is between 0 and 0.25% and the Federal Reserve aims to maintain it until 2015. The Federal Reserve decreased the interest rate by half point in December, 2008.

Also, the rate of inflation in the United States as of October 2012 was 2.16%. The current rate of inflation is 2.1% in comparison to the 3.8% rate of inflation recorded in 2008. The American inflation estimate constitutes transportation, apparel, recreation, education and communication, medical care, energy, housing, and food and beverages. Finally, the rate of unemployment as of March 2013 was 7.6%. This is equivalent to 11.7 million individuals. On the other hand, the administration’s larger U-6 rate of unemployment, which incorporates those who are unemployed, was 13.9%. In contrast, the unemployment rate in America five years ago was 4.

6% (Wallison, 2013). Question 2 The changes in interest rates, rates of inflation, and rates of unemployment can be attributed to several reasons. The changes in interest rates have been largely influenced by the activities of the Federal Reserve. The Federal Reverse has had an impact on the interest rates through altering the rate at which it loans out fund to financial institutions, altering reserve requirements of financial institutions, and by influencing the supply of funds through open market activities.

Also, the Federal Reverse’s Board of Governors have largely contributed to the changes in interest rates by making decisions on changes in discount rates after receiving recommendations from one or more regional Federal Reverse Banks. The changes in rates of inflation have been facilitated by the activities of policymakers. The rate of inflation has changed because the law makers have assessed a wide range of fundamental inflation measures to assist in recognizing inflation tendencies. The most conventional forms of inflation measures leaves out commodities that tend to fluctuate in worth often or dramatically, for example, energy and food items.

The rate of inflation has decreased because law makers have attempted to steady general consumer costs (LeRoy, 2011). Finally, the rate of unemployment has also changed due to a number of factors, one of them being employment by educational attainment. University educated individuals with a degree or higher educational qualification make up the most significant employment rate with approximately 44,648,000 of them having full time employment. In addition, this group makes up the least rate of unemployment of 4.6%. The highest numbers of unemployment are made up of people who do not have high school diplomas.

These people are followed by high school graduates who do not possess college degrees. Also, people with less than a diploma constitute the least number of people who are employed, at more than 10 million. Question 3 The strategies include encouraging entrepreneurship and small businesses and lowering taxes. Small businesses in America are the base of the United States economy providing employment to a large number of people. Encouraging business startups will encourage