Fiscal And Monetary Policy And Economic Fluctuations Research Paper

Length: 4 pages Sources: 4 Subject: Economics Type: Research Paper Paper: #68114707 Related Topics: Monetary Policy, Inflation, Unemployment Rate, Unemployment
Excerpt from Research Paper :

¶ … economic situation in the United States is favorable compared with five years ago. Five years ago, it was late 2009 and in the depths of the Great Recession, so performing better than those levels is no great achievement. But as a point of comparison, all metrics are better today. The annualized rate of GDP increase in the third quarter of 2014 was 3.9%, down from 4.6% in the second quarter, according to the Bureau of Economic Analysis (2014). In 2009, the Q3 GDP was 1.7%, which is a low number, but at the time represented positive growth following three straight quarters of declines. Thus, technically, Q3 2009 was when we emerged from recession (Treasury, 2012). GDP growth in the interim has been uneven, but the past couple of quarters indicate healthy, manageable growth that should not lead to runaway inflation.

Unemployment, which is a lagging indicator, is 5.8% as of October 2014, which is the lowest level since July 2008. In October 2009, it was 10.0%, which was the peak level. This peak occurred as a result of the recession, as again unemployment lags GDP. The levels in 2007, before the recession, were in the 4.somethings, so the current level is still higher than pre-recession levels. It has been declining ever since October 2009, but unemployment is still higher than it should be in a healthy economy.

Inflation has remained low during this period. The Bureau of Labor Statistics tracks inflation. In October 2014, it was...


This is below the target inflation rate of the Federal Reserve, with is 2% (BOG FRS, 2013). Thus, despite the strong economic growth in recent quarters, inflation is not following suit, but is in fact rather muted. Part of the reason inflation flatlined in October was a decline in energy prices, as the CPI minus food and energy saw 0.2% increase in the month (BLS, 2014). Five years ago, this was 0.1% for the month, and a deflationary rate of -0.18% for the year. This deflation was the result of the recession, and was the culmination of a deflationary trend that began in March 2009.

Interest rates have been near zero the entire time. The discount rate is current 0.75% and five years ago it was 0.5%. These rates are quite low historically and indicate stimulatory monetary policy. They were used in 2009 to help spur business investment by lowering the cost of capital, and the same logic applies today.


The story of the changes in the last five years is the story of the Great Recession and the recovery from it. Since 2009, the GDP has increased and it is growing at a healthy rate at present. The GDP was just coming back to growth in the fall of 2009 after a long period of decline. In the five years since, the GDP has mostly been growing, a sign of recovery. While the recovery has been uneven, and maybe could be considered to be weak, recent quarters have shown that the economy is finally growing at a stable, healthy rate. The even growth might reflect in the odd combination of fiscal and monetary policy responses to the recession.

The unemployment rate hit its apex (or nadir, more realistically) in October 2009 as the result of the Great Recession. The next five years have seen a slow but steady decline in the unemployment rate, to the current level. There is no reason to believe that the current level is anything other than another stopping point…

Sources Used in Documents:


BEA. (2014). National income and product accounts, 3rd quarter 2014. Bureau of Economic Analysis. Retrieved November 25, 2014 from

BLS. (2014). Consumer Price Index Summary. Bureau of Labor Statistics. Retrieved November 25, 2014 from

BLS. (2014). Unemployment rate. Bureau of Labor Statistics. Retrieved November 25, 2014 from

Board of Governors of the Federal Reserve System. (2013). Why does the Federal Reserve aim for 2% inflation over time? Board of Governors of the Federal Reserve System.
FRED. (2014) Gross domestic product. Federal Reserve Bank of St. Louis. Retrieved November 25, 2014 from
Matthews, C. (2012). Is the Obama Administration juicing the job stats? Time Magazine. Retrieved November 25, 2014 from
US Department of the Treasury (2012). Recent U.S. economic growth. U.S. Department of the Treasury Retrieved November 25, 2014 from

Cite this Document:

"Fiscal And Monetary Policy And Economic Fluctuations" (2014, November 25) Retrieved August 8, 2022, from

"Fiscal And Monetary Policy And Economic Fluctuations" 25 November 2014. Web.8 August. 2022. <>

"Fiscal And Monetary Policy And Economic Fluctuations", 25 November 2014, Accessed.8 August. 2022,

Related Documents
Fiscal and Monetary Policy and Economic Fluctuations
Words: 1049 Length: 3 Pages Topic: Economics Paper #: 10263461

Fiscal and Monetary Policy and Economic Fluctuations The global economy was relatively doing fine more than five years ago before it was hit by economic downturn or recession. During this period, the American economy was at its peak, particularly in the fourth quarter of 2007. However, this was followed by a mild recession at the beginning of 2008, which eventually turned into a severe credit crisis across the world approximately one

Monetary Policies a Meeting Between Heads of
Words: 580 Length: 2 Pages Topic: Economics Paper #: 60324073

Monetary Policies A meeting between heads of state: President Obama of the United States and Naoto Kan of Japan has just concluded. The focus of the discussion was the exchange rate between the U.S. dollar and the Japanese yen. The president and prime minister along with the respective central bank heads agree that the current market exchange rate of 120 Yen to the dollar is too high, and as a result

Fiscal and Monetary Policy and
Words: 998 Length: 3 Pages Topic: Economics Paper #: 74921591

Inflation remains low because of the seemingly unchanging rate of unemployment and income. In addition, the low inflation rate is associated with the slow economic activity during the winter months because of adverse weather conditions (Liu, 2014). One of the major reasons for the minimal changes in U.S. interest rates as compared to five years ago is the slow recovery in the housing sector. The housing sector continues to

Fiscal and Monetary Policy
Words: 1529 Length: 4 Pages Topic: Economics Paper #: 35098042

Monetary Policy The Fiscal and Monetary Policy and Economic Fluctuations The current economic situation in the United States is far different than it was 5 years ago. In 2010, the economy was very stale. The stock market was low, the housing bubble had popped, and unemployment figures were high (Schwartz, 2015). Now, while there are still serious and important issues with the U.S. economy, the general trend is for growth and recovery

Economics When the U.S. Economy
Words: 2364 Length: 7 Pages Topic: Economics Paper #: 40953227

The Canadian government seeks to have a positive balance of payments with the United States. This is, in effect, a wealth transfer. Tracking the balance of payments vs. The exchange rate, we can see the impact of exchange rate shifts on the BOP. The Canadian balance of payments in 2004, when the exchange rate ranged from 1.17 to 1.37, was $29.8 billion. In 2008, when the exchange rate was between

Economic Status
Words: 1228 Length: 4 Pages Topic: Economics Paper #: 57848674

Economic Report Card The nature of the economic world is in constant flux and changes, requiring the student of the subject to be aware of the many patterns and tendencies that are contained within any economic or market system. The purpose of this essay is to examine and compare the current economic situation of today to that of five years ago. This essay will explore the monetary and fiscal policies of