ECO/372 Economic Advisements Paper

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RUNNING HEAD: Economic Advisements PaperEconomic Advisements PaperECO/372Analyzethe economic factors affecting the U.S. economy, including unemployment,consumer income, expectations, and interest rates. Based on your analysis, providerecommendations for addressing these issues and evaluate the effectiveness ofgovernment intervention through Keynesian and Classical economic perspectives.Word Count Requirement:800-1000 words

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Economic Advisements Paper2Economic Advisements PaperAnalysis of Economic FactorsUnemploymentThe unemployment rate for May 2013, the most recent month for whichstatistics are available, was set at 7.6% (Bureau of Labor Statistics, 2013). Althoughthis is not as high as it has been in the past, it is still above the rate of 5.2%, whichWeidner and Williams state is the natural unemployment rate during a recession(para 2).. Employment rose in the professional business service, food service anddrinking places, and manufacturing (Bureau of Labor. 2013).Colanderstates,“theunemployment rate gives a good indication of how much labor is available toincrease production and this provides a good idea of how rapidlythe economy couldgrow (2010, p. 169). With the unemployment rate higher than what is ideal, thosewithout jobs are holding on to their money. This means less money in the economy,which drops demand. With demand low, prices drop. However, because theunemployment rate is barely dropping from month to month, American’s are notable to react to the low prices by demanding goods, which keeps the economy in arecession.ExpectationsExpectations play an important role in the state of affairs and presentconditions of the country. If we take the recent housing bubble bursting and theresulting decline of the housing sector of our economy, prices have fallensignificantly, to the point that peoplecannot get mortgage loans because ofthe bank

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Economic Advisements Paper3new criteria on lending. This was driven by the new expectation that the housingindustry has to regain the confidence of the consumers so that the housing demandwill rise one again which will in turn cause house building to resume and build up tothe level that it once was.The automobile industry has taken a beating also in this slow movingeconomy, which happened as a result a fall in consumer confidence, andoverproduction. Automobile manufacturers responded to the contraction in demandby cutting back on production, thereby causing layoff, car dealerships to close, and aloss in market share.In recent monthshowever,automobile manufacturers haverestructured their organizationswith thehelp of the government bailoutand haveresumed production and have gained some of the confidence of the consumer tostart spending money again.Consumer IncomeConsumer income recently has been on a slow and steady pace from reportsof consumer spending in April. Oak (2013), “there was no change in wages andsalaries from last month, yet income assets increased 0.7%.” The problem with thisis that the majority of Americans cannot tap into that resource of income because itis accessed heavilyby a richer upper classon the inside track to the economictrends. Americans who rent property have had to pay more in this past monthdueto the 0.1% increase. This causes the average middle and lower class Americans totighten their belts further and contract their buying power while the upper classmade more money from that 0.7% boost in asset income.

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