Think of this assignment as a debate. Your reading on the topic of unemployment and inflation should give you enough insights to pick your arguments and to find evidence or research to support your point of view in the matter. We have recently seen what a global pandemic can do to the U.S. economy and the world economy. The U.S. economy is very much linked with the rest of the world. The elected government has used various fiscal policies to stimulate the U.S. economy. The Federal Reserves (the Fed) have used various monetary tools to stimulate the economy as well.
Debate the actions of the government and the Fed regarding these issues.
1. What kinds of factors would you want to consider in determining a nation’s optimal rate of inflation and unemployment?
2. Pick a recent fiscal policy and a recent monetary policy. Discuss the purposes and the effects of the policies. Pros and cons? Winners and losers?
3. How would the policies affect inflation, unemployment, national debt, etc?
You are more than welcome to add many other aspects, data, facts, and analysis to the discussion.
REMEMBER: This is not a business ethic class or a law class or a religious study group or a personal story time. Use economics theories when you debate each point and argue your case.
. You are required to create one original post and reply to at least two postings of other students for each discussion You must contribute to each discussion within the deadline. The discussions must be posted in the Discussion Forum of our online classroom. To access discussion topics, click on Discussions. Points will be awarded based on the grading criteria below. Remember that the discussions take the place of classroom participation. So, please devote sufficient time and effort to this important part of our course. Your posting must be a minimum of 350 words and your thoughtful response to someone elses posting must be a minimum of 250 words
response1 :1.What kinds of factors would you want to consider in determining a nation’s optimal rate of inflation and unemployment?
First, it should be noted that the unemployment and inflation are interrelated. One of them leads to the other. In times of high demand that is not matched with increased supply of products, sellers tent to hike prices to take advantage of the situation. The increased price is what is called inflation and to control that, the governments increases interest rates to control the inflation. The increased interest rates on the other hand create a shortage of capital for investment and that translates to increase in unemployment in the area. That qualifies the consideration of prices levels in determining the level of inflation and unemployment in a country (Alisa, 2015). On the same note, money supply in the economy is an issue to consider I determining. Normally, when the volume of money in circulation is high, the money tents to lose value as it are in the hands of many. Ideally, money should be scars for it to maintain its value. The loss of value is inflation, and the government or the monetary system controls that using several tools which may include increased interest rates which on the other hand affects investment negatively leading to unemployment.
2. Pick a recent fiscal policy and a recent monetary policy. Discuss the purposes and the effects of the policies. Pros and cons?
Winners and losers?Owing to the impact of covid-19 pandemic, governments including the U.S government have resulted in the use of expansionary fiscal policy. The step taken by the government in the recent past is the increased government spending in purchase of gods and services from the local economy. That helps in giving the local trader business throughout even during times of serious recession. The advantage associated with it is that it acts to cushion the economy of a country against adverse effects of a recession. The winner is such a situation is everyone in an economy including the government since it shall secured a continued floe of government revenue (Alisa, 2015).On the other hand, a recent monetary policy applied by the federal government is the lowering of interest rates. That makes capital available for business to access and continue producing as they fight the economic recession. The economy wins it as it will not be affected adversely by the recession.
3.How would the policies affect inflation, unemployment, national debt, etc?
Increased government spending creates enough supply of money and that greatly boosts the companies that resultantly employ people to continue producing so that it can meet the artificially created demand. The increase in demand matched with increased supply solves the problem of inflation in the economy. Another effect that can be associated with increased government spending is increased tax burden on the citizens since the government has to find a source of the funding which greatly comes from taxation. The lowered interest rates create an immediate availability of capital for firms who invest in production helping in lowering unemployment rates. Again, the increase in demand due as a result of availability of money is offset by increases in supply of goods and that helps in maintain price levels (Alisa, 2015). Lowered interest rates have the impact of lowering the cost of borrowing more debt. Similarly, enjoying lowered interest rates increased the tax burden is the sense that people rush to make investments and purchase assets which the government targets for generation of its revenue.
References:
Alisa, M. (2015). The Relationship between inflation and unemployment: a theoretical discussion about the Philips Curve. Journal of International Business and Economics, 3(2), 89-97.
response 2 :1. What kinds of factors would you want to consider in determining a nation’s optimal rate of inflation and unemployment?
Several factors are determining the rate of inflation and unemployment. The optimal rate of inflation is 1.4% and is affected by the rising prices of goods, the services that the employees provide to the employers, the costs of goods, the country’s economic condition, and the GDP. Similarly, the level of unemployment is affected by different factors like poverty, education level, literacy rate, GDP, number of jobs, and the balance of services and goods. If the goods are in excess and the services are numerous, then unemployment will be less. The countries always desired that the rate of employment should be less and maximum people should be doing some job and contribute to the country (PICARDO, 2019).
2. Pick a recent fiscal policy and a recent monetary policy. Discuss the purposes and the effects of the policies. Pros and cons? Winners and losers?
The tax cut policy is an example of fiscal policy. It cut 20-35% taxes from the income to give benefit to the education sector and the government. The government tried to benefit the education sector as the literacy rate will be increased, and the education sector will be given more facilities. It was signed in 2017, and the residents were not happy as they had to face the loss in their income. (USA, 2017). The current monetary policy is to sustain the prices of goods and to increase the employment rates. The pros and cons include the upper class’s restriction and benefits to the lower class of society (CRSR, 2018). Both types of policies have positive and negative impacts on society, but efforts are made to get the maximum benefits.
3. How would the policies affect inflation, unemployment, national debt, etc?
The policies are the foremost and essential factors to affect inflation, unemployment, and national debts because the country’s system is in the hand of government and policymakers. They have to give direction to the people that they have to spend their official and professional lives. They have to design such policies that are for the benefit of people and should be long term. It is seen that the countries that have strong policies have low national debt and an optimum inflation rate. The government should ask the policymakers to analyze all the circumstances carefully before designing the policies. It is also an essential factor that the public does not know the political influence and relations with other countries, so they have to follow the policymakers and the government (KRAMER, 2020).
References
CRSR. (2018). Monetary Policy and the Federal Reserve: Current Policy and Conditions. Retrieved from https://www.everycrsreport.com/reports/RL30354.htm…
KRAMER, L. (2020). How Do Governments Reduce Inflation? Retrieved from https://www.investopedia.com/ask/answers/111314/wh…
PICARDO, E. (2019). How Inflation and Unemployment Are Related. Retrieved from https://www.investopedia.com/articles/markets/0815…
USA. (2017). Tax Cuts and Jobs Act. Retrieved from https://home.treasury.gov/TaxCutCutCut
