The Economy, Monetary Policy and Monopolies - Admission/Application Essay Example

The past economies recovering from harsh financial distress shows that unemployment rate remain wedged at elevated heights for a long time, and slow growth mean larger budget shortfalls. By the year 2012, the inflation rate is expected to rise slightly than last five years. This may result into going back to pre-financial crisis levels of which the aggregate inflation from 2005 to 2010 was 2.89%. In the reasonable hard slog scenario, the financial gap would surpass $13 trillion in the next few years, if the government policies do not change.

This is almost $2.5 trillion higher than the deficit as per the official economy of the last five years. Job recoveries after the financial collapses of 2008 seem to be weaker than those aspects associated with other kinds of economic declines. Consequently, unemployment remains dramatically high for a longer period. Currently, the US government has the capacity to borrow large amounts of money with consumers getting home loans, student loans, and car loans at dramatically low rates. By the time this rates change, (this environment will change soon) it is going to devastate the economy of US.

The government has not yet fallen apart because the federal regime can borrow massive amounts of cash very cheaply as compared in the last five years when the government was unable to borrow because of huge spending on national security. In case interest rates in American debt return to average levels, a complete collapse may happen. Basing on the rapid decline of the dollar, and the amount of money printing that the Federal Reserve has done, interest rates has risen sharply. Rising interest rates devastate the government making it much expensive for the local government to borrow cash.

In addition, home loans are out of reach for citizens except for the very wealthy as compared in 2009 or 2007. Consequently, US may be wiped out financially, thus, bring the economic activities to a standstill. At the current tax revenues and rates of government spending, the US exceeds 100% of the GDP at the start of 2012. Moreover, the US economy faces some challenges in terms of keeping the increasing governmental debts in line with the increase in economic growth. Most probably, demographic trends of lesser births and more retirees with longer life spans place additional strains on America’s income/debt relationships.

High federal spending is due to severe recession and the persisting high level of unemployment. 2. Propose two strategies that the federal government could implement that would encourage people to spend more money in order to create employment opportunities. Consumer spending accounts for 65% of the average demand, with various factors affecting how much the American population is able and willing to spend. Changes in consumption have a big impact on economic path of a country. Concerning the future of consumer spending, those with skills and education are likely to do well and will have the capacity to support their families while spending.

In order to motivate the people to create employment, the government has implemented strategies like immediate actions to initiate good jobs in the States, quick relief for stressed families, immediate, direct, assurance for homeowners, rather than a bailout for careless mortgage lenders, and an aggressive, rapid response to the financial crisis, by the use of available resources. The other strategy that the federal