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ECO/372 Economic Advisements Paper

An advisory paper covering macroeconomic concepts and financial decision-making.

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    RUNNING HEAD: Economic Advisements Paper Economic Advisements Paper ECO/372 Analyze the economic factors affecting the U.S. economy, including unemployment, consumer income, expectations, and interest rates. Based on your analysis, provide recommendations for addressing these issues and evaluate the effectiveness of government intervention through Keynesian and Classical economic perspectives. Word Count Requirement: 800 - 1000 words

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    Economic Advisements Paper 2 Economic Advisements Paper Analysis of Economic Factors Unemployment The unemployment rate for May 2013, the most recent month for which statistics are available, was set at 7.6% (Bureau o f Labor Statistics, 2013). Although this is not as high as it has been in the past, it is still above the rate of 5.2%, which Weidner and Williams state is the natural unemployment rate during a recession (para 2). . Employment rose in the professional business service, food service and drinking places, and manufacturing (Bureau of Labor. 2013). Colander states, “the unemployment rate gives a good indication of how much labor is available to increase production and this provides a good ide a of how rapidly the economy could grow (2010, p. 169). With the unemployment rate higher than what is ideal, those without jobs are holding on to their money. This means less money in the economy, which drops demand. With demand low, prices drop. However, because the unemployment rate is barely dropping from month to month, American’s are not able to react to the low prices by demanding goods, which keeps the economy in a recession. Expectations Expectations play an important role in the state of affairs and present conditions of the country. If we take the recent housing bubble bursting and the resulting decline of the housing sector of our economy, prices have fallen significantly, to the point that people cannot get mortgage loans because of the bank

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    Economic Advisements Paper 3 new criteria on lending. This was driven by the new expectation that the housing industry has to regain the confidence of the consumers so that the housing demand will rise one again which will in turn cause house building to resume and build up to the level that it once was. The automobile industry has taken a beating also in this slow moving economy, which happened as a result a fall in consumer confidence, and overproduction. Automobile manufacturers responded to the contraction in demand by cutting back on production, thereby causing layoff, car dealerships to close, and a loss in market share. In recent months however, automobile manufacturers have r estructured their organizations with the help of the government bailout and have resumed production and have gained some of the confidence of the consumer to start spending money again. Consumer Income Consumer income recently has been on a slow and steady pace from reports of consumer spending in April. Oak (2013), “there was no change in wages and salaries from last month, yet income assets increased 0.7%.” The problem with this is that the majority of Americans cannot tap into that resource of income because it is accessed heavily by a richer upper class on the inside track to the economic trends. Americans who rent property have had to pa y more in this past month due to the 0.1% increase. This causes the average middle and lower class Americans to tighten their belts further and contract their buying power while the upper class made more money from that 0.7% boost in asset income.

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