Economics 1800 words Paper Due in 8 hours from now

ECONOMIC OUTLOOK

15th May 2018

HISTORY OF CHANGE IN RELATION TO FUTURE

Bureau of Economic of Analysis indicates that the Gross National Product is currently at 18.3 billion and that U.S has about 8% per year in the last 8 years. Since the end of recession, the G.D.P has grown by 2.1% annually. In another study, 2013 registered 52,705 G.D.P per capita, 54,504 in 2014, 56,175 in 2015 and 57,436 in 2016 which translated to 1.7%, 2.4%, 2.6% and 1.6% respectively. Basing from the statistics, there is a possibility of G.DP continual slow rate, a similar case that was experienced in 1990 and 2000s and this is attributed to recession effects which has caused economic hitch.

Personal saving rate in U.S is corresponding to the ratio of income saved. As from 1960 to 1999 recorded a major decline in the net savings and net investment percentile. 1960 recorded 11% on net savings and 9% on net investment while in 1998 saw 7% of net savings and 9% net investment. Investment and savings will continue recording a crisis unless there are tax reforms and policies that will salvage the situation. Some studies attribute this crisis to the government being unable to fund worthwhile domestic investment and that; the investment majorly lies on foreign investors.

The rate of unemployment has in the past fall during the era of economic prosperity and the rise during the recession. Unemployment has recorded a variation from as low as 1% during the World War I to as high as 25% during the period of great depression. Recently in 2018, unemployment dropped from 4.1% to 3.9% which has been the lowest data since 2000s. An average unemployment rate as from 1948-2018 is 5.78% and there is a possibility of fall in the future and by 2020, there will be a decline to 4.2%. Interest rate of U.S has recorded a major decline as from 1900s to 2018. In 1995, the annual percentile of the interest rate was below 2.5 and by 2015, the rate was almost at 1% and by 2020, it is projected to hit 3%.

GOVT POLICIES INFLUENCING ECONOMIC GRWOTH

Government can use momentary policies so as to boost economic growth, not forgetting political and social policies too. Take for instance, the following policies;

Reduction in business taxes: The tax policy should be streamlined in a way that ensures that there is capital formation and this can be achieved by increasing the after tax return to investment. This business tax reduction should be aimed at offsetting the inflation that is caused during the effective tax rate on the business output. Tax reform will ensure that there is increase in tax base by elimination of deducible items and reducing margin of the tax rate.

Government saving: The government can increase its saving base by ensuring that the budget deficit is reduced and a better way of doing this is by limiting government purchases and in other way, tax can be raise so as to reduce the deficit or to increase the surplus which will consequently increase the national saving. The government has two channels of increasing the rate of saving; the government can directly increase the rate of savings by making its own savings which is also known as public savings. The government can as well have private saving, which is a saving of the households and the corporate sector which is majorly based on incentives.

Reduction of personal income tax: Personal income reduction will increase personal savings for the investors and make them inject a lot of capital in the business so as to increase the economic performance. There will also be lower marginal tax rates which will in turn improve incentives for labour supply, saving and investment.

The government can also increase economic growth by improving infrastructures; national infrastructures can be highways, airports and other public owned capital. Human capital is also another major input that is effective in economic growth. Investing in knowledge and skills will be of essence. Entrepreneurial development and by encouraging research and development always ensures that there is new mechanisms of economic growth.

ANALYSIS ON HOW MONENTARY POLICY

Pricing Level: The growth of the money stock increases economic productivity, this being a general rule, it means that increase in price level in any market. The monetary policy will either affect the inflation or deflation, where inflation is the general increase in price due to increase in quantity of money, while deflation is the productivity rise than the stock of money. Economist uses a theory of measuring inflation to 1 so as to make the inflation to be at zero rates to avoid affecting the pricing techniques.

Inflation rates: Inflation is noted when economic growth is attributed to increased spending. Banks in collaboration with government can be used to influence the money supply by influencing the actual printing and distribution of the money rather than depending on the interest rates of the banks. In the U.S, the Federal Reserve shifted from controlling actual monetary aggregation. Increasing or decreasing the demand can also influence the inflation rates, that is when a central government increases or decreases the current demand of goods and services so as to manipulate the inflation rate. Economic policies also to a bigger extend will affect the inflation directly by influencing the public expectation about the future of inflation. These anti-inflation policies are usually announced by the central government after consultation with the national and state government and in any situation that credibility is not granted before the public, expectation on inflation will not fall

Price level targeting is a policy that involves reaching over a given time but in some situations, price level can create uncertainty of price and wages setting for the companies and employees. Fixed exchange is based on the fixed exchange rate with the foreign currency. This is due to the difference in degrees of fixed exchange rates which can be categorised in respect to how fixed exchange rate.

EFFECTS OF TRADE DEFICIT AND SURPLUS ON GDP AND PRODUCTIVITY

Trade deficit is developed in situation that a country import more products than the value of the export. Trade surplus on other hand is realised when a country exports more products than its imports.

Trade surplus and deficit has an effect on Gross Domestic Product, GDP but the value amounted from this effect must be considered in response to the size of the country. Trade surplus is a vital indicator and should therefore be noted to realise the extent of export a country involves itself so as to drive an economic growth. Deficit and surplus plays a vital role in the global market especially countries that depends on export. In 2006, trade deficit dragged the U.S economic growth; this is due to the fact that there was an increased import displacing domestic output that is reducing growth of the Gross Domestic Product. In 2007, U.S recorded a trade deficit of 763.6 million dollar.

Economic growth inspires import growth, there is a theory that decrease in imports will as well reduce economic growth. In U.S, national debt in the trillions does not look like a financial relief and U.S trade deficit is as a result of net inflow of capital from the rest of the world. Economic theory indicates that continual trade deficit will ultimately damage the economic growth. U.S is considered the largest deficit nation and has always overturned this theory. U.S can trade deficit since it has relatively strong labour force and a huge G.DP per capita, this can be translated to the consumers paying off their debts from the trade.

IMPORTANCE OF MARKET FOR LOANABLE FUND AND FOREIGN CURRENCY

Loanable fund is the value of total of all the money that investors or people and business institutions have saved and lends out for the borrowers to invest with rather than personal usage. The theory of loanable fund is based on classical market analysis that will ensure that supply, demand, and interest rates are catered for. Supply of the loanable fund is drawn from persons and organizations, take for instance, the government and business men and business entities. The supply is ensured when business make output that they use some to make and run business while saving the rest, the saved portion is used to loan other investors who are willing to borrow the capital or businesses and return at the agreeable time and interest. Supply and demand is applied in the market during the process of the acquiring the loanable fund and this consequently affect the interest rate and time that the loan will take.

Foreign currency is an external currency that is traded on a foreign exchange market. Foreign exchange market is a platform for trading foreign currency; buying and selling. Exporters will sell the foreign currencies will the foreign currency is bought by the importers. The market besides acting as a platform for transaction, it also acts as place for intermediating and it is not limited to a geographical space or nation. It does contain a wide range of dealers who are involved in the foreign market and currently, the entity involved is bank. Exchange banks will discount for and sell foreign currencies; they issue bank drafts, affect the transfers and at times facilitate credit activities. Moving on, there are also acceptance houses as another dealer in this market, and they function to help remit by accepting the bills on behalf of customers. Another function of this market is hedging; avoidance of risks which are associated with foreign exchange and if the risks are so extensive then the market should work on reducing them and this is achieved by forward contract. Forward contract is usually for a quarter of a year which is a contract to buy or sell foreign currency in a given date in future according to the price arrived at .

RECOMMENDATIONS.

Strategic plan can be achieved and surpassed but only if economic policies are effectively applied in the market and the business is run based on strong economic theories. For instance, for one to obtain a loanable fund from any fiscal entity, it is wise to consider the demand, supply and the current interest rates, this will minimise any inflictions on the output such that, one will obtain the fund when its demand is low and use it when the demand for his production is high so as to realise a profit and meet the interest rate. Foreign exchange market also despite being open and more transparent to operate in, it is of importance to know the dealers involved and the rate of selling or buying of the currency in response to the market. The market keeps fluctuating due to difference in degree of economic growth realised in a specific nation. I would recommend appreciation new forms of technology so as to realise credibility. Block chain for instance when incorporated in money transaction, it will ensure that particular process is distributed and not centralised or decentralised so as to evade cases of malware.

References

The National Bureau of Economic Research. (n.d.). Retrieved from http://www.nber.org/

NBER (National Bureau of Economic Research) Working Papers — University of Leicester. (n.d.). Retrieved from https://www2.le.ac.uk/library/find/databases/n/nberworkingpapers

Grading Guide Week 3

Content	Met	Partially Met	Not Met	Comments:
Student developed an economic outlook forecast that includes an analysis of the history of changes in GDP, savings, investment, real interest rates, and unemployment and compare to forecast for the next five years.				Entire paper is awkward wording and confusing to understand
Student developed an economic outlook forecast that includes a discussion of how government policies can influence economic growth.
Student developed an economic outlook forecast that includes an analysis of how monetary policy could influence the long-run behavior of price levels, inflation rates, costs, and other real or nominal variables.
Student developed an economic outlook forecast that includes a description of how trade deficits or surpluses can influence the growth of productivity and GDP.
Student developed an economic outlook forecast that includes a discussion of the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan.
Student developed an economic outlook forecast that includes a recommendation, based on their findings, of whether the strategic plan can be achieved and the student provides support.
The paper is 1,800 words in length.	x
		Total Available	Total Earned
		12	5

Writing Guidelines	Met	Partially Met	Not Met	Comments:
The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements.			x
Intellectual property is recognized with in-text citations and a reference page.			x	APA not followed for citations
Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper.			x
Sentences are complete, clear, and concise.			x	Not concise
Rules of grammar and usage are followed including spelling and punctuation.			x
		Total Available	Total Earned
		3	0.5

Assignment Total	#	15	5.5
Additional comments: Paper is totally confusing and appears to be just many words written that do not say anything relevant

�Paper is to not be centered per APA

�Data requires a citation

�Why is this not done?

�Not true

�What did they shift to?

�No they manipulate the supply of money

�Do not understand what you are trying to say

�This is not true

�Awkward wording is confusing

�Entire paragraph is confusing

�This entire par graph is nonsense and confusing