Question

While over the long run, the economy grows about 2 to 3% per year on average, over the shorter term, the economy goes through business cycles. Think about the growth rate of GDP, the inflation rate, and the unemployment rate over the last 12 months. What conclusions about the state of the economy? Would you describe the economy as booming, recovering, or in recession during the last few years? Why? Use the AD-AS model to describe the economy. Which curve do you think caused the change? Explain your reasoning. (Explain in 200 Words)

Macro Economics

Answer 1

If we consider the US economy the inflation rate has remained below 2 % and unemployment rate has rendered near 4% while the real GDP has grown marginally from 3.2% to 3.5% levels. The CPi Inflation has been near lowest levels of 1.8%.

Thus the economy has seen near to full employment and lower inflation with strong robustness in economic pace. Thus economic condition is neither recessionary nor inflationary but very much recovering.

The US Trump Administration has adopted expansionary fiscal policy as the taxes havebeen cut diwn and government discretion spending has risen. Thus the aggregate dekand shall change and consumptions will get boost. This is good indicator that prices shall rise in future and so shall real GDP.

The economy hower is strongly driven by US Fed Contractionary monetary policy which has raised interest rates and thus the inflation has smoothened in short term and real GDP has been shrinked causing modest growth in GDP year on year.

Exchanse Rate Dl G N CL Cwnhent Accrunt Balan ce 0p Increases top0 了 --. Ini kal--E9uilibrium