Money and the Economy

MONEY AND THE ECONOMY 4

Moneyand the Economy

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Question1

Inthe past 15 years, America has been on the major world headlines forall the wrong reasons. It is now in the public domain that the budgetof the US is in dire need of revamping. Research has identifiedvarious elements that have led to the decline of the Americaneconomy. One of the primary elements that led to this decline is thelevel of unemployment. The unemployment rate shows the direction inwhich the country’s economy is moving. A weak economy isrepresented by a rising level of unemployment that is characterizedby low spending and slow growth. When an individual loses a job, thewhole family is affected and eventually the entire country. Due tothe low salaries and wages that the American workers earn, theirpurchasing power has significantly reduced, hence reduced taxes.

Theother problem is that business corporations in the United States havebecome wealthier than in the past. The principal objective of thevast majority of foreign organizations is to make short-term profitsand are hardly concerned in investing for posterity. This behaviorhas a great impact on the United States` economy. Their greed isevidenced in numerous aspects of their behaviors such as fluctuatingstock prices and scrimping on investment expenditures. Most of theseorganizations have no value with their employees who are devoted totheir work and creates value for shareholders and customers.

Question2

Anyimbalance in the balance of payments (BOP) of a country can havedetrimental effects on the economy. The effects of a debt depend onthe levels of private sector borrowing. For instance, during therecession, the private sector debt decreases as they save more. Itmeans that the public sector can offset the increase in savings andfall in expenditures that are a threat during recession. It isessential to analyze that overall debt because an increase in bothprivate and public debts could lead to unsustainable economicproblems. The amount of debt is a concern because it depends onwhether the debt is sustainable and whether the government will meetthe demands for social security.

Whena country is in debt, the amount of debt could cause economicinstability. In particular circumstances, countries with large debtshave seen investors lack confidence. It leads to high bond yieldshence exerting pressure on the government to reduce the expenditures.Sometimes the government responds by printing more money that causesinflation to be out of control. Most of the government spending isfinanced by foreign borrowings. If these overseas investors loseconfidence, they may sell their securities. It means that a countrywill lose in terms of foreign exchange.

Question3

IfI were in charge of America`s economy, my priority would be on thetrade. This is because establishing trade treaties would help protectthe country from foreign companies whose primary aims is to destroylocal industries. It would be achieved by creating tariffs in theappropriate places and where needed. Other countries would adopt thepolicies established leading to fair competition.

Theother priority would be defending invasion of the local industries bythe foreign organizations. I would defend the industries, resourcesand organizations from overseas corporations whose primary agenda isto gain control of the key industrial technologies. I would eliminateoffshore outsourcing and sale of crucial companies to foreignindustries. The third priority would be to establish a DomesticIndustry Competitiveness. In addition, I would change the taxstructures to encourage growth of small industries. To greaterextents, I would reduce the depreciation rates on capital investmentsas well as research expenditures. This will lead to more investment.Research will ensure that better investment opportunities areidentified, and it will gradually help boost the country’s economy.