Economic Critique

Topics: Monetary policy, Inflation, Unemployment Pages: 5 (1396 words) Published: July 9, 2013
Economic Critique

University of Phoenix
January 21, 2013

Economic Critique

Currently, our country is in a recession, and the unemployment rate is at an all-time high. The unemployment rate consists of people not only out of work but also those who can work and are actively looking for work (Colander, 2010). Unemployment also means there are more people out of work than there are jobs available (Colander, 2010).

Unemployment has extremely negative effects on many people and businesses. The government budgets funds for unemployment benefits and when the unemployment rate rises, the government has to re-allocate funds to accommodate the rising rate. Reallocating these funds also can be challenging when the unemployment rate increases because fewer citizens are paying taxes that fund welfare programs (Buzzle, 2013). Unemployment also can be detrimental to businesses. When families have a reduction in income, they often reconsider what their necessities are, and they often stop purchasing certain items, putting businesses and the economy at risk (Buzzle, 2013). Although it is evident that unemployment affects those looking for work, it can also negatively affect those working because the cost of labor decreases. People are doing more work and are receiving less compensation. They are also willing to accept lower wages just to ensure they have a job (Buzzle, 2013)

Although unemployment can be both cynical and frictional, right now, we face a cynical unemployment. Cynical unemployment happens because of a downturn on the economy. The demand for goods is reducing so production reduces and companies have to lay off workers. The United States Government has recently reduced taxes for businesses, allowing them more flexibility to hire employees. Although the government has added unemployment to part of the stimulus package, there has been very little increase in jobs. Our researchers have struggled finding information on what exactly the government has done to assist with the unemployment rate.

There are many expectations concerning the United States’ economy. Even though most would think that the expectations would not be good, the United States economy grew at a 2% annualized rate in the three months ending on September 30, slightly beating analysts' expectations but indicating a recovery struggling to gain momentum (L.A. Times, 2012). The 2% does not put us back to where we were but it is a start and is putting us on the right track to accomplish our goals. We must do everything we can to avoid another recession to boost our economy. With the scare of going over the fiscal cliff many believed that we would go into another recession and put the economy back to the bottom.

The unemployment rate was forecast to come in lower than expected, averaging 7.9%. The unemployment rate has stayed the same throughout the year starting at 7.8% and ending at 7.9% in the fourth quarter (Reuters, 2012). “The economy has effectively landed—nothing to suggest further overall weakening growth, nothing to suggest a rebound either,” says Steve Blitz, ITG Investment Research’s chief economist (Forbes, 2013). Overall the expectations of the economy have been better than predicted, and we hope that it will continue to grow and see more progress throughout 2013.

Consumer Income
When the economy is at its best, the unemployment rate is low and the consumers have the benefit of increased spending. Taxes are paid at a higher rate, but the taxes the consumer pays effects the group the consumer is in, not the spending. Also in a good economy, the job market is excellent, and it is simple for consumers to discover new work. Consumers can purchase more luxury items, such as cars, boats, and new homes. There is always a demand for money in any...

References: Colander, D.C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin.
Buzzle. (2013). Retrieved from
Forbes. (2013). Retrieved from
Inman, P. (2012). No recovery until 2018, IMF warns. Retrieved from
Los Angeles Times. (2012). Retrieved from,0,6352490.story
Reuters. (2012). Retrieved from
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