According to easynomics.com, from Q3 2012-Q2 2015, there was a confirmed upward trend with real GDP rising which translates to approximately 2.26 percent annual growth rate. Although the increase rate is too slow that people may not feel the recovery, but it does suggest the increase.
In my opinion, how effective low interests rates are to encourage consumers to borrow and spend depends on the elasticity of the demand for loans. If the demand for loans is inelastic, a sharp reduction in interest rates will only increase the loans by a small amount. Please refer to Appendix G. In this case, lowering the interest rates to 0.5% is not enough to stimulate demand. As a result, quantitative easing, another monetary policy is being utilized, as bank rates could not go any lower. Although there are other underlying factors that contribute to the high unemployment rate in the UK, it is shown that reducing bank rates is not the key to solving this problem.
Executive Summary The United Kingdom (UK) is one of the largest economies in Europe ranked at position 13 of the freest economies globally in 2015. The country recorded a GDP of 2.67817 trillion dollars in 2014 with an average annual GDP growth rate of 2.8% in the last five years.
Currency exchange rates can be categorised as floating, in which case they constantly change based on a number of factors, or they can subsequently be fixed to another currency, where they still float, but they additionally move in conjunction with the currency to which they are pegged. Floating rates are a reflection of market movement, demonstrating the principles of both demand and supply, as well as limit imbalances in the international financial system. Fixed exchange rates are predominantly used by developing countries as they are preferred for their greater stability. They grant further control to central banks to set currency values, and are often used to evade market abuse. (MacEachern, A. 2008; Simmons, P.
According to Staff review of the Economic Situation for January 28-29, the economic growth rate picked up in the second half of 2013. There was a gradual increase in the total payroll employment and a decline in unemployment rate. Consumer price inflation was still performing poorly than expected, while longer-term inflation expectations remained stable.
The increase largely showed a positive contribution from personal consumption expenditures (PCE), nonresidential fixed investment, residential fixed investment, private inventory investment, state and local government spending, and exports. Current-dollar GDP increased 3.4 percent, or $589.8 billion, in 2015 to a level of $17,937.8 billion, compared with an increase of 4.1 percent, or $684.9 billion, in 2014. Real disposable personal income rose 3.4 percent over the past four quarters, a rapid pace. At the same time, real consumer spending rose only 2.6 percent. This difference indicates that consumers have tended to save a rising fraction of their income gains over the past year.
Joani Mitre Mrs. Girard AP Economics November 23, 2014 How Will America be a Year From Today? Five years after the end of the Great Recession, there is finally some cause for optimism. GDP and employment growth are modestly increasing and manufacturing is bouncing back, in large part due to growing exports. According to economists surveyed
1). In 2016, the inflation rate was at 2.07 percent, and as of February 2017 the rate is about .90 percent (“Inflation Rate,” n.d.). As we can see, the economy has bounced back from its position during the recession. GDP has increased drastically since 2009, unemployment has decreased past its position from 2007, the interest rate has risen, and inflation has also gone up which indicates a strong and healthy economy. Although a higher interest rate is unfavorable for consumers and businesses, it means that the government is confident that the economy will continue to improve. This also means that consumers have enough disposable income to spend on whatever they wish, so the government does not need to lower the rate in order to encourage borrowing and spending. These metrics indicate that the economy has recovered from the Great Recession, and is continuing to improve.
The 2008 Great Recession helped in restoring economic growth and lowered unemployment. Both fiscal and monetary policies are related ways use to increase the aggregate demand and aggregate supply. So, a shift in the aggregate demand curve to the right is expansionary fiscal policy meaning government spending has to exceed (2012). The G- component aggregate demand help to spend, allowing the C- component of aggregate demand to increase. On the other hand, the monetary policy promotes spending, investments, and lending increasing aggregate demand. During the downturn, the systems concentrate on growing demand total while the supply strategy looked for long-term growth in productivity and efficiency (Pettinger, 2012).
Consumer expenditures rising during this term will move the aggregate demand curve to the right as increased spending increases demand. This BLS report indicates that the next term should show statistical aggregate demand increases, and according to the Classical model perspective encourages a laissez-faire approach concerning correction of the long-term economic factors (Colander, 2010). The Classical model works perfectly as consumer expenditures are trending on the rise when factoring consumer expenditures. Until a more apparent downturn shows itself, the invisible hand should continue to work naturally.
The U.S economy is a mixed economy and it is the largest in the world. It accounts for 17 to 22 percent of the world’s GDP. Consumer spending in U.S accounts for 70% of the national economy. People generally spend on necessities like food, housing and clothes and on buying non-essential goods and services that fall under discretionary spending category. With a huge reduction in gas price and unemployment there is a steady increase in discretionary spending these days. According to U.S bureau of labor statistics consumer spending increased 3.4 percent in 2015 after advancing 4.2 percent in 2014.
In 2014, economist, predict the housing market will recover, and the interest rates will gradually go up increasing the money in the pockets of the consumers. There are many predictions to what approach the government should take to recover the housing market, but ultimately it will be important for the government leaders to prove they can react quickly if any plan backfires. In 2014, many are predicting the housing market to recover and interest rates gradually go up, putting more money in the pockets of the consumers, but this act can also halt any growth in the housing market. There are many predictions to what approach the government should take, but if the economy starts declining, will the government be resilient and adaptable to change course and continue to grow the economy.
Background The “Great Recession” is commonly used to explain the massive economic contraction that occurred in the United States during the fourth quarter of 2007. However, the actions of the United States spanned to other nations, leaving massive effect on the global economy. One nation that took on serious financial burden during this recession was the United Kingdom. This nation first faced the effects of the Great Recession beginning in the first quarter of 2008. Overall, the initial mass effects on the nation can be attributed to the nation’s reliance on the financial sector. In fact, after partially stabilizing in 2009, the country struggled with a double-dip recession between 2010-12, and continues to struggle with some of these effects.
Such a process can be very time consuming and imprecise, without, of course, having a market currency price to begin with. The exchange-rate system is an important topic in international economic policy. Policymakers and journalists often seem to treat the choice of exchange-rate system as one of the most important economic policy choices that a national government makes, on a par with free international trade. Under most circumstances and for most countries, a system of freely floating exchange rates is likely to be a better choice than attempting to peg the exchange rate.
Lardy points out that since the beginning of 1990’s, the consumption growth, as a source of economic growth, has diminished substantially compared with other sources, such as investment and exports. Specifically, household consumption dropped from slightly more than half of GDP in the 1980’s to an average of 46 percent in the 1990’s. After 2000, household consumption kept decreasing. By 2005, it only accounted for 38 percent of GDP, the lowest share of any major economy in the world. From the beginning of the decade until the global