When the demand for U.S. dollars increases, the value of the dollar will increase or appreciate (Stone 2008, pp. 685). As a result, U.S. products become more expensive for foriegners causing a reduction in exports and increasing imports. This not only effects the U.S. economy, but also affects the economies in other countries. Monetary policies influence and are influenced by international developments, including exchange rates, and based on these market conditions the U.S. government can make strategic changes to these policies to maintain the country’s economic stability (full employment, stable growth and price stability).
Many economists believe “that a rapid stock of the nation’s money causes inflation” (pg.169). The rate of inflation can affect borrowing power for a new business owner as, “the rate of inflation expected by the borrower and the lender will be influence by various interest rates” (pg. 169). When inflation is high, many lenders interest rate increase to compensate for the impact inflation has on their business and the decrease in purchasing power of money that has to be paid back in the future. Since, the FED set the interest rate in which the banks borrow from, Edgars’ ability to borrow enough money or establish a line of credit to start his business will be affected by inflation, interest rate and financial policies.
Because these loans are IOUs, they can be offset by printing more money. This gives central banks an unlimited supply of money. Overdoing this will lead to inflation that hurts the economy (Colander, 2010, p. 406). One problem in government accounting is how they classify debt and expenditures. Accounting addresses several ways a business may classify an expenditure and depreciation over time.
In the case of our government, debt is managed primarily by selling bonds. The process is cyclical as the government has to sell new bonds to pay for older bonds that have matured. It is important to realize that debt should be judged in relation to assets. While debt is probably never a good thing, in the case of the U.S. economy it is not as bad as it seems. When we view some of the assets of the United States such as natural resources, skilled workforce, and tax revenue generating businesses, we see that our assets have enough value to sustain our current debt level
Increase taxes over the wealthiest and reduced the taxes over the less wealthy individuals trying to get a more progressive model. These measures would affect in the short-run the aggregate demand for good and services, stimulating consumer spending, earnings and profit rise. This effect will depend on the multiplier effect and the crowding-out 3. What economic policies should the US Federal Government pursue over the next decade? We would consider the following fiscal policies: * Reduction of defense expenditure.
Decreasing the interest rate effectively increases consumer and businesses consumption. Lower interest rates also increase investments and net exports (Hubbard, 868). These increases push true GDP back in line with potential GDP and, as a result, production increases. This increase in production also increases the need for workers, ultimately increasing employment. Conclusion The Federal Reserve is a very powerful entity and has a large amount of influence on how our nation’s economy performs.
They could charge my business a lot of money on income tax rate and that could cost the organisation a lot of money. This could have an effect on whether I meet my targets or not. Interest rates have an effect on how much I will be paying back in loans and the interest that is charged on the loan I have taken out. Inflation is a factor that I could look at to see how it will affect the amount of money of whether I make or loss in my business. This is because if the government decides to increase taxes then the general public would have less money to spend on the electronic equipment.
Going by the contemporary crisis in the Medicare program of America, Bozic (2011) dictates that the solution to the crisis will demand increase in the tax margin on the employees. In addition, doctors and physicians are more likely to face salary cuts to allow proper budgeting of the program. Furthermore, the increase in demand for Medicare will have an automatic upward shift in the cost of insurance. There is a link between the positive effects of Medicare and the Economic effects of the system. The existing economic effects presented by the rise in demand for Medicare occurred because of the rise in the number of aged individuals.
The office of Budget and Management develops and analyzes these policies .But the final decision making on such fiscal policies rest in the arms of the President of the United States. Fiscal policy effects the economy’s production and employment rate because when the economy is expanding and employment rate is raising government spending decreases. When in the midst of a recession government spending tends to increase. Also as peoples income increase the amount the government collects in taxes also increase. When the United States is in a recession the amount of taxes the government collects
Deficit spending - Definition Like other institutions, governments operate on a budget -- or try to do so. When the expenditures of a government (its purchases of goods and services, plus its tranfers (grants) to individuals and corporations) are greater than its tax revenues, it creates a deficit in the government budget. When tax revenues exceed government purchases and transfer payments, the government has a budget surplus (as in the late 1990s in the United States). Following John Maynard Keynes, many economists recommend deficit spending in order to moderate or end a recession, especially a severe one. When the economy has high unemployment, an increase in government purchases create a market for business output, creating income and