Fiona MacNairn

Pd. 4
2/1/14
Economics Essay
The current state of the economy is slowly recovering from the recession, but
unemployment levels are still too high and the gross national product is increasing too
slowly. In 2008, the United States economy went into a recession due to the, bursting
of an 8 trillion dollar housing bubble (stateofworkingamerica.org). Consumer spending
and business investment dropped, and the unemployment rate was higher than it had been
since the Great Depression in the 1930s. Although, the economy is recovering, there are
things that could still be done to quicken the process and aid the economy. The Gross
Domestic Product (GDP) saw a 3.2 % increase for the fourth quarter in 2013, and a 1.9%
increase across the full year of 2013 (forbes.com). The Consumer Price Index (CPI),
which measures the inflation, increased by 1.5% overall in the year of 2013 (bls.gov).
Finally, in December 2013, the Bureau of Labor Statistics calculated that there was 6.7%
unemployment in the United States. The United States currently uses a mix of fiscal and
monetary policy. Fiscal Policy allows for the government to use taxing and spending to
affect the economy. Monetary Policy allows the government to manage the money supply
in order help the economy. It is necessary for the government to implement a more
progressive tax policy, to spend more on programs that benefit low income families, and
for the Federal Reserve to lower the reserve requirement, lower the interest rates, and buy
more T-Bills in order to strengthen the economy, maximize employment, and minimize
inflation.
If the U.S. government were to implement a progressive tax policy, then lower-
class families would be able to spend more, which would simulate the economy and
create more jobs. The Gross Domestic Product would increase, because tax breaks on
lower- income people would aid them in overcoming poverty and spending more.
According to the Huffington Post, 75.4% of all wealth is owned by the richest 10% of the
people in the United States. If the rich are taxed more heavily than others, then the wealth
will be distributed more evenly allowing for more economic stimulation. In addition
research by economic analysts proves that giving tax breaks to lower- income taxpayers
allows for more job growth and a higher GDP. Laura Tyson and Owen Zidar from the
New York Times state, Tax cuts for everyone else are a much more effective path to job
creation. Our research found a statistically significant and positive relationship between
tax cuts for the bottom 95 percent and job growth at both the national and state levels. ...
Lower-income taxpayers spend a higher share of their tax cuts (economistsview.com).
Secondly, if the U.S. government increases their spending on programs for lower-
income people, such as welfare, then the economy is sure to see a boost in growth, which
means a lower unemployment rate. There are many Congress members that argue that if
more is spent on social welfare, the economy will plummet. However, this is not the case.
If the amount spent on social welfare increases, then poorer people will be given the
benefits needed to lift themselves out of poverty. Then, they will spend more, which in
turn will create jobs and raise the GDP to a healthier level. According to journalist
Laudon Aron, and increase in spending on social welfare programs would lower
poverty and improve the lives of millions of people today, all the while giving them the
tools they need to climb the economic ladder. Equally important, they would reduce
dependence on the social safety net, lowering future government spending
(metrotrends.org). The key is for the U.S. government to increase spending now, which
will have a positive affect in the future, allowing them to eventually decrease spending in
Fiona MacNairn
Pd. 4
2/1/14
order to recompensate for the increase.
Lastly, the Federal Reserve must lower the reserve requirement, lower the interest
rates, and buy more T-Bills to allow for a greater money supply in circulation and less
expensive loans. Monetary Policy is the use of Federal Reserve tools to affect the
economy. The Federal Reserve can use their powers to help heal and strengthen the
economy. The Federal Reserve lowers the reserve requirement to increase the money
supply, which is detrimental when there is high inflation. However, due to the extremely
low inflation right now, it is safe for the Federal Reserve to lower the reserve
requirement. Investopedia.com states that, By lowering the reserve requirements, banks
are able loan more money, which increases the overall supply of money in the economy.
Secondly, if the Fed lowers interest rates, then it will be less expensive to take out loans,
which will lead to more business investment, which will create more jobs. Finally, when
the Fed sells T-Bills, the economy slows because the government is decreasing the
money supply. If the Fed buys more T-Bills as opposed to selling them , then they would
be injecting more money into the pockets of citizens, allowing for a high money supply
and a higher chance of GDP growth.
It is difficult for the U.S. government to balance good GDP growth and low
unemployment, while maintaining a low inflation rate. Currently, GDP growth is too low
and unemployment rates are too high, so the government needs to focus their attention on
these issues more than inflation. The government must not worry too much about
inflation right now, but still keep it in mind. If the U.S. cuts taxes just a bit for low
income people, and spends a small amount more on social welfare programs, then they
can strengthen the economy and increase employment while maintain low inflation.
Additionally, if the Federal Reserve lowers the Reserve Requirement and interest rates,
and increases the buying of T- Bills, then it can impact the economy in a overall positive
way. Currently, the United States priorities regarding the economy should be
concentrated on decreasing unemployment and raising the GDP through a progressive tax
policy, increased social welfare spending, and using the tools of the Fed to aid these
goals.
Works Cited
Aron, Laudan. "Can Strengthening the Economy Both Reduce Inequality and Increase
Economic Mobility?" MetroTrends Blog RSS. N.p., 19 Dec. 2013. Web. 02 Feb.
2014. <www.blog.metrotrends.org>.
"Consumer Price Index- December 2013." Bureau of Labor Statistics. N.p., Dec. 2013.
Web. 01 Feb. 2014. <www.bls.gov>.
"Databases, Tables & Calculators by Subject." Bureau of Labor Statistics Data. N.p., n.d.
Web. 02 Feb. 2014. <www.data.bls.gov>.
"Do Tax Cuts Stimulate the Economy?" Economist's View. N.p., 19 Oct. 2012. Web. 02
Feb. 2014. <www.economistsview.com>.
Gallant, Chris. "How Do Central Banks Inject Money into the Economy?" Investopedia.
N.p., 26 Feb. 2009. Web. 02 Feb. 2014. <www.investopedia.com>.
Sharf, Samantha. "U.S. GDP Grew 3.2% In The Fourth Quarter 2013." Forbes. Forbes
Magazine, 30 Jan. 2014. Web. 01 Feb. 2014. <www.forbes.com>.
Zuesse, Eric. "United States Is Now the Most Unequal of All Advanced Economies." The
Huffington Post. TheHuffingtonPost.com, 08 Dec. 2013. Web. 02 Feb. 2014.
<www.huffingtonpost.com>.
Fiona MacNairn
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Bibliography
Aron, Laudan. "Can Strengthening the Economy Both Reduce Inequality and Increase
Economic Mobility?" MetroTrends Blog RSS. N.p., 19 Dec. 2013. Web. 02 Feb.
2014. <www.blog.metrotrends.org>.
"Consumer Price Index- December 2013." Bureau of Labor Statistics. N.p., Dec. 2013.
Web. 01 Feb. 2014. <www.bls.gov>.
"Databases, Tables & Calculators by Subject." Bureau of Labor Statistics Data. N.p., n.d.
Web. 02 Feb. 2014. <www.data.bls.gov>.
"Do Tax Cuts Stimulate the Economy?" Economist's View. N.p., 19 Oct. 2012. Web. 02
Feb. 2014. <www.economistsview.com>.
Gallant, Chris. "How Do Central Banks Inject Money into the Economy?" Investopedia.
N.p., 26 Feb. 2009. Web. 02 Feb. 2014. <www.investopedia.com>.
"The Great Recession." State of Working America. N.p., n.d. Web. 01 Feb. 2014.
<www.stateofworkingamerica.org>.
Mutikani, Lucia. "Households, Trade Keep U.S. Economy Humming in Fourth Quarter."
Yahoo Finance. N.p., 30 Jan. 2014. Web. 02 Feb. 2014.
<www.finance.yahoo.com>.
Sharf, Samantha. "U.S. GDP Grew 3.2% In The Fourth Quarter 2013." Forbes. Forbes
Magazine, 30 Jan. 2014. Web. 01 Feb. 2014. <www.forbes.com>.
U.S. Department of State. "United States Economy - Monetary and Fiscal Policy." United
States Economy - Monetary and Fiscal Policy. N.p., n.d. Web. 01 Feb. 2014.
<www.countrystudies.us>.
Zuesse, Eric. "United States Is Now the Most Unequal of All Advanced Economies." The
Huffington Post. TheHuffingtonPost.com, 08 Dec. 2013. Web. 02 Feb. 2014.
<www.huffingtonpost.com>.
Web Site Evaluation Form

1. URL of the Website:
http://metrotrends.org______________________________________________________
2. Website Title: ______Metro Trends
Blog__________________________________________________________
3. What organization and/or individual created this website?
_______A news Outlet called Metro Trends
_______________________________________________________________________
4. Can you rely on this information? Yes No Why or why not?
__________I will say maybe because while it had true information, it is not as well
known or credible as the new york times for example.
6. Is the material: ___Primary/Original ___Secondary/Derived?
7. When was this page written or last updated? _____________December 2013
_________________________
8. Rate this web page.

use with caution good, basic information excellent for the assignment

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1. URL of the Website:
http://www.bls.gov______________________________________________________
2. Website Title: _______Bureau of Labor Statistics
_________________________________________________________
3. What organization and/or individual created this website?
_________________________The United States Government
_____________________________________________________
4. Can you rely on this information? Yes No Why or why not?
__The government projects this information, and it is very credible.
6. Is the material: ___Primary/Original ___Secondary/Derived?
9. When was this page written or last updated? ________December 2013
________________________________
10. Please rate this web page.

use with caution good, basic information excellent for the assignment

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Fiona MacNairn
Pd. 4
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1. URL of the Website:
http://____www.investopedia.com____________________________________________
______
2. Website Title:
_____Investopedia________________________________________________________
___
3. What organization and/or individual created this website?
_______Investopedia______________________________________________________
_________________
4. Can you rely on this information? Yes No Why or why not?
______.Even though the name sounds silly, I found that many of my class notes
supported what this website claimed, so it is credible.
6. Is the material: ___Primary/Original ___Secondary/Derived?
9. When was this page written or last updated? ______dont know
__________________________________
10. Please rate this web page.

use with caution good, basic information excellent for the assignment

1. URL of the Website:
http://finance.yahoo.com____________________________________________________
__
2. Website Title: _______Yahoo Finance
_________________________________________________________
3. What organization and/or individual created this website?
_________Yahoo_________________________________________________________
____________
4. Can you rely on this information? Yes No Why or why not?
_Yahoo is a credible news outlet, like bbc or Cnn. It has news stories of what the
Fed decides on its finance page.
6. Is the material: ___Primary/Original ___Secondary/Derived?
7. When was this page written or last updated? _________January
2014_____________________________
8. Rate this web page.

use with caution good, basic information excellent for the assignment

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1. URL of the Website:
http://_forbes.com_____________________________________________________
2. Website Title:
_____Forbes___________________________________________________________
3. What organization and/or individual created this website?
__________Forbes________________________________________________________
____________
4. Can you rely on this information? Yes No Why or why not?
_Forbes is a credible magazine, like any economist magazine. Its news to accurate
and not just made up. It has many subscribers.
6. Is the material: ___Primary/Original ___Secondary/Derived?
9. When was this page written or last updated?
________________________________________
10. Please rate this web page.

use with caution good, basic information excellent for the assignment

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