Aggregate Demand and Supply Models Economic Critique Team Paper
Erick Cabrera, Aaron Santiago, Marcus Crabtree, Abram Meza, April Mendez
June 30, 2014
Prof. Michael Gay
When describing the current economic state of the United States there are several factors that must be included. These factors will affect the aggregated demand and supply of the United States economy. Such factors consist of unemployment, expectations, consumer income, and interest rates. All these economic factors will help us evaluate and establish important stimulates that will resuscitate the United States economy.
There have been many obstacles for the United States as the economic ...view middle of the document...
With the United States spending at this amount and trying to recover to compete in the global market, they United States will have to learn to rely on themselves once more to move back into the economic spotlight. It will take more than just flooding the economy with currency and jobs to fix a collapsing economy in the United States. People will have to be trained into the right jobs while carefully spending their money on the right products to help push the United States out of a residual unemployment cycle and into healthy growth in the global economy.
Expectations of the United States economy are definitely looking more optimistic than in previous years. The United States economy is expected to grow in a positive increase in the second half of 2014. GDP is on the rise at about a 3% annualized rate as the expansion cycle for growth. Consumer spending and confidence in spending remain below average of what would be considered normal levels by the standards of past economic expansions. An increase in job growth and consumers feeling more secure will help resuscitate economic expectancy. A stimulation of a second half growth push over the expected 3% pace will occur when people have a higher disposable income and increase their spending habits. Inflation in the near future will continue to counteract deflationary bias of a high debt we have experienced and with the United States still recovering from the financial crisis. The United States generally point to higher, but modest core inflation trends in the 1%-3% range for the next several years which will be better for the economy. The Fed’s forward guidance implies that the federal funds rate will remain near 0% through mid-2015 with the risk that the “lift off” date will be further delayed and will probably remain negative through 2017. The bond market continues to expect treasury yields to rise with a bias towards a steeper yield curve until the Federal Reserve raises short term rates compared with last year’s.
The United States economy has been incrementally increasing because of expansionary policies put into action following the meltdown in 2008. The President of the United States, along with congress, has made every attempt to pump money back into the damaged economy at a pace that would not cause for major inflation. This was done by executing a fiscal policy that gave money to a few large banks and corporations who were on the verge of default and bankruptcy. Congress has repeatedly passed legislation that provides tax breaks and bail outs for these financial institutes who operate recklessly. The leadership in this country has done nothing but perpetuates a cycle of unsustainability and slows down the recovery.
The bailout had a lasting effect on the income of average Americans; who were affected the most by the 2008 crisis. Unemployment was high and people were willing to work for less pay. This caused businesses to be able to demand more labor from people at a cheaper...