Weak Labor

Topics: Monetary policy, Economics, Inflation Pages: 1 (336 words) Published: December 17, 2012
Assignment #1
Weak Labor Report Fans Fears - Ben Casselman (7/7/12)

1.How many jobs were created in the United States in June? Which sector showed the biggest job gains? Which sector showed the biggest job losses? 80,000 jobs were created in the US in June, and the manufacturing sector showed the biggest job gain, with gains of 11,000 jobs. Retail showed the biggest job loss, with losses of 5,400 jobs. 2.What are 3 reasons behind the lower number of jobs created in June? In other words, what concerns kept U.S businesses from hiring more workers? Three reasons behind the lower number of jobs created in June are due to government spending falling, business investment leveling off after a small drop in the recession and manufacturing is in a lesser demand overseas. 3.What fiscal policy action could theoretically be taken to help boost economic growth and thus decrease unemployment? Be sure to include a supporting well-labeled figure. Why in practice is this policy action difficult to implement in 2012? The expansionary fiscal policy should be used to boost economic growth and decrease unemployment. It would increase government spending and tax revenues would be cut. This would input more money into the economy and spur economic growth. This policy would essentially inspire the market’s confidence in the government which would lead to lower borrowing costs for the government. It is hard to implement this in 2012 because the public debt is high then, small increases in the interest rate can disrupt public finances. Moreover the increase in government spending would cause the reduction in the private investment sector, and since there would not be an expansion in the money supply to alleviate rise in income and money demand, the planned investment spending is crowded by the higher interest rate. Therefore, it would be unlikely to implement this policy due to the debt being so high and even higher interest rate would have a negative effect on the planned...
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