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Analyze the Current Economic Situation in the U.S. as Compared to Five (5) Years Ago. Include Interest Rates, Inflation, and Unemployment in Your Analysis

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Analyze the current economic situation in the U.S. as compared to five (5) years ago. Include interest rates, inflation, and unemployment in your analysis.

It is not a secret that our current economic situation is deteriorating, and many elements are worse than it was five years ago. One way to see the differences in the past five years is to compare the interest rates. According to the Federal Reserve Bank, in 2007 the average interest rate for that year for a 6 month certificate of deposit (CD), was 5.23 percent (Federal Reserve Bank, 2012). They also noted that the week ending November 23, 2012 that for the same CD interest rate for a six month term is only 0.55 percent, and that is down 0.02 percent from the end of the previous week (Federal Reserve Bank, 2012). Investors are not getting the return on their money that they were once able to get, and in turn, are not able to invest more money into the community. People who are able to invest a large sum of money into a CD, would rather keep it into a savings account, and be able to access their money, rather than have it locked away, and not be able to make much profit on their money. On the flip side, inflation rates have dropped, from where they were at five years ago. At the end of October 2007, the average inflation rate was 3.54%. That number has risen and fallen since then, the inflation rate at the end of October 2012 was 2.16% (Inflation Data, 2012). Even though the current inflation rate is lower now than it was five years ago, there was a dramatic rise in inflation rates in the previous five years prior to 2007. The unemployment rate in the U.S. is at an extremely high percent. Historically, from 1948 to 2012, the U.S. unemployment rate averaged 5.8 percent. The highest unemployment rate in the history of the U.S. was November or 1982 where it was at 10.8 percent, and the record low was in May of 1953 of 2.5 percent (Trading Economics, 2012). According to the Bureau of Labor Statistics, in October of 2007 the average unemployment rate was 4.7, under the average unemployment rate. Since then, the unemployment rate has skyrocketed. October 2012, the average unemployment rate was 7.9 percent, over 2 percent higher than the average unemployment rate. Unemployment plays a vital role when economists observe the economic situation of the U.S. When people do not have jobs, they do not have the money to put back into the economy, to stimulate, and improve the economy.

Propose two (2) strategies that the federal government could implement that would encourage people to spend more money in order to create employment opportunities.

One way that would encourage people to spend more money would be to cut consumption taxes. The Business Dictionary defines consumption tax as, "a tax on spending by consumers, such as sales tax" (Business Dictionary, 2012). Many would say that having a progressive consumption tax would benefit the economy. It would tax the amount of money that people spend, not the amount of income that they make, or save. This could be true, but with a higher tax on purchasable goods, people are less likely to spend money on those goods. If there were fewer taxes on items, the items would be cheaper, prompting consumers to purchase more items. Consumption expenditures are purchases of newly produced goods and services, either domestic or foreign, by households. The purchases include flat-screen TVs, smart phones, automobiles, clothing, jewelry, and more (O'Sullivan, Sheffrin, & Perez 2012, p. 281). With no consumption tax on goods, the consumers would then have more money to spend on other purchases, which would also be cheaper because there would be no consumption tax. The more money spent on items purchased, would be more money put back into the economy. It would also mean that businesses would grow, and need to hire more people to compensate for the higher volume of customers.

A second strategy for getting consumers to spend more would be giving rebate for their spending. Purchasing an Energy Star rated appliance, means that you can qualify for a tax rebate. The tax rebate is for 30% of the cost, up to $500 per 0.5 kW of power capacity, with no upper limit. This refund expires December 31, 2016 (Energy Star, 2012). If there were more rebates, for things such as cars, televisions, or even fixing up an old house to help the neighborhood, people would be more prone to purchase bigger items. They would feel appreciated, and they would be helping the economy and the environment at the same time. The more that people purchased would mean that there would need to be more sales people on staff, more people in the production facilities, and more people to help install things when it is needed, increasing the number of employed people.

Identify a situation in the past 50 years in which the government used antitrust policies to stop a monopoly from occurring. Include the circumstances of the proposed monopoly and the reason the government stepped in. Predict what would have occurred had the monopoly succeeded.

A monopoly is a market in which a single firm sells a product that does not have any close substitutes (O'Sullivan, Sheffrin, & Perez 2012, p. 155). The Clayton Antitrust Act states that, "Legally, a monopoly or "trust" exists when an individual or firm can explicitly force competitors out of business by slashing prices, buying up and hoarding supplies, bribery or intimidation (This Nation, 2012). A monopoly



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