Current Economic Climate essays

Current Economic Climate essays Facing the current economic climate in the US, the Federal Reserve, for the past twelve months, has dropped interest rates in an effort to encourage spending and stimulate the economy in general. After losses for the past quarters and the events of September 11th, the country has driven right into a recession. Since interest is the price of money, the Federal Reserve lowers interest rates so people and businesses have the incentive to spend money, therefore spurring the economy. The Federal Reserve took no action last time they met in January. For the past quarters, the Federal Reserve has constantly dropped interest rates in an effort to prevent the country from entering recession. As I mentioned earlier, dropping interest rates stimulates the economy by motivating spending from not only people, but also businesses. Through its fiscal policy, the government also attempts to guide the country away from a recession. President Bush introduced a tax cut last year to stimulate spending but it didnt prove very successful. September 11th dampened the economy the current recession. The Federal Reserve is in charge of maintaining a balance. They are interested in preventing inflation by raising interest rates or stimulate spending by lowering interest rates. As the article explains, Analysts believe the economy is slowly recovering and may get out of the current recession in the next few months. Jack Guynn, president of the Federal Reserve Bank of Atlanta told Bloomberg News that the Federal Reserve will consider raising interest rates if inflation becomes a concern. Inflation is an increase in the general level of prices. As unemployment rates go down, Inflation increases as shown in the Phillips Curve. Analysts are looking at the lower jobless rate, which went from 5.8% in December to 5.6% in January. The rate of change was not that significant when considering that December has a higher amount of people looking for jobs because ...