Macroeconomics Research Paper Example | Topics and Well Written Essays - 1000 words

Macroeconomics - Research write up ExampleDemand for goods and services are related to the certain saki esteem which is nominal quest set up minus expected ostentatiousness, whereas nominal interest appreciate is the market rate quoted in the fiscal pages of the newspaper. In this case, interest rate is almost zero that means nominal interest should be pit to expected inflation and the expected inflation is about 2% per year which is justifiable, it indicates that nominal interest rate showing unacceptable growth, adequate amount of rise in the nominal interest rate end development the real interest rate to a desirable level. Usually when interest rate falls, acquire increasing and individuals purchasing power increases and so does the demand for goods and services, but if unemployment is very elevated and an miserliness is facing low GDP growth per year than shows the imbalance in the economy. consort to the Philips curve, final payment increases rapidly when unemplo yment is low and leases increases slowly when unemployment is low therefore the government and the firms should raise wage rate to attract scarce workforce to increase the national production which lead eventually increase the demands for produced goods and services. According to Okuns law, a percentage increase in unemployment causes a 2% fall in real GDP, whereas in this case unemployment is very high, which is one the major reason of GDP downfall (Hall, 2011). Currently inflation is not matching the level of employment and GDP rate, therefore Fed and the government should increase the wage rate and decrease income tax rate to an acceptable level to encourage the spending which might outgrowth in increased demands for good and services and will eventually increase the national production, the government should overly increase the subsidize the national production and increase conditional relation duty so national products will be preferred over international products (Hall, 2 011). Conclusion By increasing nominal interest rate with a justifiable amount, by leveraging wage rates and the local production, and by increasing import duty the Fed and the government will be able to stabilize the economy and the balance of payment, the economy will grow at justifiable rate, the unemployment will decrease and the national production will increase while maintaining the inflation rate of about 2% which is quite justifiable. Part 2 Introduction Amendments in legislation and regulations were not the only causes of 2008 financial crises, changes in pecuniary and fiscal policy also contributed to the crises. The national Reserve dropped its federal funds rate very quickly to a very low rate, and kept the rate at historic lows for an extended period of time. Secondly the US deficit has increased its acquire from foreign sources, especially from emerging countries such as China which are enjoying economic surplus. Contribution of exemplary and fiscal policy in the c auses of financial crises To eliminate the effect of the collapse of the technology equity spew out and the terrorist attack on Twin Tower on September 11, 2001 on the economy Fed hot seat Greenspan injected low-interest rates below held guidelines which was an attempt to instill huge amount of liquidity in the US monetary system which actually resulted in lowering the interest rate by 2003 to 1%, the decided interest rate by Fed breaks the record of fifty years, that