Macroeconomics Essay Example | Topics and Well Written Essays - 1000 words - 2

Macroeconomics - Essay ExampleBoth are equally bad for the national deliverance. Current GDP, Inflation and Unemployment Rate The US GDP in year 2012 is estimated at 15.68 trillion. Real GDP in the US increased by 3.6 percent annually in the third arse of 2013 over second quarter and the ostentation judge is estimated at 1 percent in the month of October, 2013 that is lowest since October 2009. Similarly, unemployment ordain is estimated at 7 percent in November 2013 down from 7.3 registered in the previous month (US Inflation Rate). Unemployment Rate in medieval 10 years The following graph taken from the sanction of Labor Statistics provides unemployment rank for last 10 years period in the US (Source http//data.bls.gov/timeseries/LNS14000000). It is interesting to note that during boom period of economy between 2003 and 2007, unemployment rate continued to slide. Post pecuniary crisis it began rising rapidly and went up to almost 10% during 2009 and 2010. As of now it is hovering around 7 percent. Inflation Scenario in Past 10 years The US Federal Reserve states, Inflation is a general increase in the overall price levels of the goods and services in the economy (Federal Reserve). The Fed takes into account several price indexes while calculating ostentatiousness. The fiscal policy is governed by the Federal Reserve and it aims at achieving maximum employment, low inflation and moderate long-term interest rates. The following graph shows inflation rates for last 10 years in the US. Source http//www.tradingeconomics.com/united-states/inflation-cpi It is amply clear that inflation rates vary significantly in last 10 years. During financial crisis, it touched to as low as -2 % in 2009 and prior to that it was at its bloom of youth at 6 percent in 2008. For last several quarters, the inflation rates are hovering between 1% and 2%. The Federal Reserve employs tools of monetary policy to control inflation and bring down unemployment rates as its major objectives. Monetary Policy Influences Inflation and Unemployment Usually, the Federal Reserve influences the federal notes rate that banks charge each other for short-term loans. These changes in short-term rates are eventually passed on to the businesses and households for their borrowing needs. Short-term rates also influence long-term rates such as residential mortgage rates, car loans etc. When the federal storehouse rate is reduced it triggers demand for goods and services. more than demand for goods and services tend to generate more employment reducing unemployment rate that exist. Higher demand of the goods and services will also push the operate increase. Post 2007 financial crisis, the Federal Reserve took drastic steps to stabilize financial system and thereby the US economy. In this process, short-term interest rates were brought to near zero. Low interest rates aim at supporting businesses and households to finance new spending and thereby boost the economy and r educe the unemployment rate. However, in this process, there is possibility that inflation rate would also start going up. As far as inflation rate is within the targeted rate, the Fed rate will keep using the tool of lowering the interest rate to boost the economy and generate the employment. The moment inflation starts exceeding the target rate, the fund rate will move in the reverse direction to cool down the economy and thereby control the inflation rate (Monetary Policy). Post 2007 financial crisis, when the economy was shattered the Fed resorted to the