Question

2. Are there contrasting views on current economic conditions? (You must research this question)

Answer 1

2.

There are contrasting views of the economy and it can be observed using different macroeconomic indicators. The first such indicator is unemployment rate that is just over 3.7% in the USA. It is generally considered that natural rate of unemployment is 4%. But, this standard, the economy is very near to the full potential level and economy is doing well. But, it is a contrasting view as well. The 3.7% unemployment rate is U-3 unemployment rate that is official and it does not include discouraged workers, marginally attached workers and underemployed workers. Even it considers part time workers, working for 4 hours per week only as employed workers. So, U-3 is not a correct representation of the unemployment rate. A true unemployment rate is U-6, that is 6.9%. It considers discouraged workers, marginally attached workers and underemployed workers as unemployed workers. It tells the true level of unemployment that says that economy is far away from reaching full potential level.

The second macroeconomic indicator is federal fund rate that is 1.75% to 2% that indicates that economy is doing well and Fed is putting FFR to be higher than 0% for the last many quarters. But, the contrasting view is that Fed is still in wait and watch mode and increase the rate by 25 basis point and wait to sell the impact for 2 to 3 quarters. It means that Fed is still not confident about the full recovery from the 2008 economic crisis. It means that economy is still under the watchful observation of the government and Fed where the government is still in an expansionary fiscal policy mode. Hence, economy is not in so good condition as it is projected.