Question

Discussion Topic You are the Chairman of the U.S. Council of Economic Advisors and you have been asked by Congress to testify on the economy. During that testimony, you are asked why, in what appears to be a period of prosperity, our GDP growth rate is still under three percent and despite very low unemployment and inflation according to the statistics, there is still a lot of concern in the country about jobs and wages. Discuss how you would answer this question and justify what you say from sources in the course material and outside it. Be prepared to share your views with peers.

Answer 1

US is showing recovery signs after 2008 subprime crisis. Its inflation and unemployment rates are in control. Still there is no confidence in people about income levels and also about income stability which leads to less domestic aggregate demand.This leads to further cycles of less income and less investments. Many companies like Apple are having huge cash reserves but are not confident of overall world economy and investments are therefore poor overall and in USA in particular.

Following are additional reasons for concerns in US economy.:

1. Trump policies of protectionism has raised costs for construction business which is still facing less demands. This feeling of less confidence is among other companies as well.

2. US has still not covered from recessionary pressures and Federal reserve is still monitoring economy wherein it should let market forces prevail now.

3. USA is not focusing on building manufacturing and service sector competitiveness which can create long term jobs. Policy makers are not daring to do this. Other countries are taking away these jobs by offering cost effective solutions.

4. European Union, Japan are facing recessionary impacts and EU especially is increasingly dependent on Germany. A feeling of dissociation is strong in EU (Eg. Brexit).

5. In USA nature of jobs is changing and people should be ready to make necessary changes and accept lesser wages.

USA mainly needs confidence and rest will fall in place.