Carrier & Tyler

Topics: Federal Reserve System, Monetary policy, United States Pages: 2 (434 words) Published: November 11, 2013
Overview
Our economy emerged from the recession back in 2009; however, the economy didn’t grow much since then. According to the Bureau of Economic Analysis, gross domestic product (GDP) for the first quarter of 2011 grew only 0.4 percent while the second quarter grew at 1.3 percent. The increase in the second quarter can be attributed to a decrease in imports of petroleum, auto, and engines due to the earthquake in Japan, an increase in federal spending for national defense, and increase in business investment. However, it didn’t rise as much because of decrease in consumer spending, especially in auto vehicles and parts. (Bureau of Economic Analysis) The Federal Reserve announced earlier this month that they will keep the short-term interest rates near zero percent for at least the next two years hoping to get consumers to spend. Normally, the Federal Reserve would announce low interest rates are extended for “an extended period” but this statement sounds like they are also pessimistic about the economy. Low interest rates have been in place for several months and it hasn’t quite spurred the economy like it’s supposed to. The reason for this is that banks have pulled back on all types of loans and are holding onto more capital in case of further bad loan losses. This in turn doesn’t help the economy because consumers aren’t able to get the money they need to spend to spur the economy. (Federal Open Market Committee) Our current unemployment rate is at 9.1 percent. Employment has been one of the biggest issues of why our economy is still not growing. People without jobs are unable to earn money to spend to stimulate the economy, while those that have a job are uncertain whether tomorrow they will still have it. This percentage could be inaccurate and may in fact be higher since many people have searched for so long and have become discouraged that they just dropped from the workforce. (Bureau of Labor Statistics)

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