Running Head: Economics 1
Economics
The question as to whether the company should expand or contract its business next year,
the firm should expand its operations. The above proposal is drawn from an overview of the
current economic situation in the US, budgets to be implemented by Biden, effects of monetary
policy, and interpretation of the labor market. The essence of this paper is to assess these
economic factors and explore their possible effect on the business context.
Economic condition of USA at present.
In other words, the US economy remains in the process of recovery following the
previous economic recession resulting from the COVID-19 pandemic. The recession led by the
spread of the pandemic had adverse effects on GDP growth, a rise in the unemployment rate, and
a fall in inflation. Nonetheless, the recovery has been quite quick despite government-backed
measures and increased retail spending. Although GDP has been showing signs of recovery of
late, analysts predict good performances in future years (Zandi, Yaros, Bernard,
Yarosjr@moodys, & Com Assistant Director, 2021). On the other hand, unemployment rates
have seen improvement, but the economy still has a long way to go down the road to total
recovery. Inflation has been fairly moderate, but there might be more inflation coming with more
demand and supply-chain issues.
Overview of Fiscal Policy
It is also anticipated that the proposed expansion in fiscal policy, especially the provision
of $59 billion for affordable housing under President Biden’s budget proposal for 2024, will
benefit the macroeconomy. Government expenditure may create a multiplier effect that boosts
total economic activity and leads to high demand for homes. Affordable housing, however,
remains a challenge for many people who may not be able to get decent and affordable places to
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stay (Zandi, Yaros, Bernard, Yarosjr@moodys, & Com Assistant Director, 2021). Nevertheless,
due diligence must be exercised before concluding that deficit spending has no negative impact
on the entire economy given the current debates on deficits and inflation.
Overview of monetary policy
For instance, regarding monetary policy, the Federal Reserve’s decision concerning the
rate of fed funds that play a big role in the housing sphere may determine the level of money for
mortgage loans. Key macroeconomic indicators including the GDP growth, inflation rate, and
unemployment rates influence the Fed’s policy. However, there are debates as to whether the
Fed’s move to raise the Fed funds rate towards the end of the pandemic has been effective in
terms of the impact on inflation, unemployment, and other issues (Zandi, Yaros, Bernard,
Yarosjr@moodys, & Com Assistant Director, 2021). Demand pull and cost push are contributing
to the current inflationary pressure. Nevertheless, these developments should be closely
monitored since any adverse impact could cause immense damage to the economy and the
housing sector. The deliberate manner in which they hike up the interest rates is aimed at
avoiding inflation and at the same time promoting further economic growth.
Overview of the Labor Market
The business enterprise also needs to not forget the hard work market in its decision-
making manner. As the housing market faces potential dangers of a collapse, modifications
within the workforce and wages may be important to align with the converting marketplace
situations (Del Giudice, De Paola, & Del Giudice, 2020). There are three unique explanations of
unemployment that we have reviewed in magnificence: classical unemployment, frictional
unemployment, and structural unemployment. Classical unemployment occurs when there's a
mismatch between the supply and call labor, resulting in a surplus of unemployed people.
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Frictional unemployment is a natural part of the labor market as employees transition among
jobs, and it is frequently transient. Structural unemployment arises from changes within the
structure of the economic system, leading to a mismatch between employees' capabilities and
available activity opportunities. This sort of unemployment may require retraining or talent
development to mitigate.
When faced with the opportunity of a housing marketplace crumble, people can also opt
for sticky wages over salary cuts. Sticky wages talk over with the resistance of employers to
reduce wages even in the face of economic downturns. While sticky wages may also shield the
earnings levels of people, it could cause unemployment for some people if companies cannot
find the money to pay better wages. Therefore, the results of sticky wages should be cautiously
evaluated, and capability options along with flexible salary adjustments or retraining applications
need to be taken into consideration to mitigate unemployment risks.
Determination of Aggregate Output (GDP)
To correctly talk with predominantly engineering bosses, it's vital to understand how
combination output (GDP) is decided. Changes in unemployment have a big effect on aggregate
output. When unemployment charges are excessive, it suggests a decreased degree of
combination expenditure as patron spending decreases (Zandi, Yaros, Bernard,
Yarosjr@moodys, & Com Assistant Director, 2021). This lower in consumption leads to a lower
in aggregate output.The relationship between unemployment, mixture expenditure, and mixture
output may be summarized as follows: when unemployment increases, purchasers have fewer
earnings to spend, resulting in a decrease in mixture expenditure. This lower then interprets to a
lower in aggregate output as corporations produce less to satisfy lower patron demand.While
excessive consumption is frequently seen as essential for a healthful economic system, it ought
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to be balanced with different factors like savings and funding. High intake can stimulate
financial increase within a short period, but sustainable growth requires a balance among
consumption, savings, and investment. Encouraging financial savings and investment can result
in capital accumulation and improved productivity, which might be crucial for long-term
monetary prosperity.
Conclusion
Finally, it can be concluded that the outlined above economic factors create favorable
conditions for the extension of our company’s business next year. This is supported by the
present economic situation in the US, the effects of both fiscal policy and monetary policy, as
well as concerns related to the labor market and aggregate output. Although there are still risks
and uncertainties, careful expansion steps taken can enable our company to profit from the
developing housing market.') Therefore, it is important to regularly check economic indicators
and adjust strategies to maintain success. In summary, the detailed review of these economic
issues reflects the extent and scope of economic information required for evaluating business
operations. Using these factors, we propose strong-backed advice that will impress our boss by
exhibiting expertise that will help the firm grow further this year.
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References
Del Giudice, V., De Paola, P., & Del Giudice, F. P. (2020). COVID-19 Infects Real Estate Markets:
Short and Mid-Run Effects on Housing Prices in Campania Region (Italy). Social Sciences, 9(7),
114. https://doi.org/10.3390/socsci9070114
Zandi, M., Yaros, B., Bernard, Yarosjr@moodys, & Com Assistant Director. (2021). Prepared by.
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