Question

What are the major objectives of U.S. government economic policy? Include a discussion of how the U.S. economy is linked with the economies of other nations and how the actions of other governments, businesses and private individuals in other countries cause economic changes in the U.S., including recession.

Answer 1

The federal government is pursuing policies aimed at creating a healthy economy that benefits all Americans— not an easy task. An economic policy that favors one segment of society could be harmful to another. Maintaining inflation under control by raising interest rates makes it difficult for businesses to get capital to expand and hire additional workers; the rate of unemployment may increase. On the other hand, low interest rates can lead to inflation as spending increases; as prices rise, many workers find their pay rises meaningless.Elected officials find that the only way they can reach an agreement on any aspect of it is to work out compromises because of the complexity of economic policy. Even a president whose party controls both Congress houses find it hard to get all that the branch of the executive wants. For example, trade offs, embracing somewhat higher inflation in order to keep business expansion going is necessary for economic policy.

The value of money is decreased as prices for goods and services rise sharply, and it costs more to purchase the same items. Inflation is called this state. Prices remain at the same rate while inflation is kept low. Circumstances beyond the control of the government can affect prices. A prolonged drought and early freeze in the corn belt that reaches Florida's orange crop causes shortages that lead to higher prices. Higher prices may generate inflationary prices across the economy for certain vital commodities, such as oil. Economic growth is measured by the gross domestic product (GDP), the dollar value of the overall United States output of goods and services. A prosperous economy may have a 4% annual GDP growth rate; a stagnant economy may grow at less than 1% a year. Unemployment is high in a stagnant economy, productivity is poor, and jobs are difficult to find. Two consecutive quarters of negative GDP is known as a recession. In the 1970s, a peculiar mixture of high unemployment and high inflation, known as stagflation, was witnessed by the US.