Aggregate Demand and Supply Models Essay examples

1094 Words Aug 2nd, 2014 5 Pages
Aggregate Demand and Supply Models
Aggregate Demand and Supply Models
ECO/372
Aggregate Demand and Supply Models
The following report will detail out the current state of the U.S. Economy. The report will discuss the following:
* Current economic state in regards to unemployment, expectations, consumer income and interest rates
* The existing effect of the economic factors on aggregate demand and supply
* Fiscal policies that are currently being recommended by government leadership
* The effectiveness of those fiscal policy recommendations from the Keynesian and Classical model perspectives.
Unemployment rates fluctuate when the supply and demand for human resources are out of balance. The supply and demand are a result
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When people switch jobs or are seasonally laid off that also affect the unemployment rate.
The expectations that the economy is going to turn around are not mutually agreed upon by the economists. There are many factors including the upcoming election that will affect the economy. The uncertainty has reduced the economic activity more than in previous recessions. Higher uncertainty has increased the unemployment rate by at least 1% since 2008 (Leduc, 2012).
According to the Current Population Survey (CPS) real median annual household income has decreased by 1.3% between December 2011 and January 2012, from $50,673 to $50,020 (Green, 2012). The rise of consumer prices is a contributing factor to the decline in household income. Other factors that affect consumer income are changes in the average hourly earnings and average hours worked per week.
There are a number of different factors that must be taken into account when evaluating the current and future movement of interest rates. Interest rates are most affected by the condition of the U.S. economy. Inflation also is a factor determining interest rates. Lenders will be reluctant to lend money for a period of time if the purchasing power of that money is going to be less when it is repaid. Inflation will cause the rise of interest rates. The federal government will affect interest rates as they are nations largest borrower.
Aggregate supply and demand are affected by such factors as

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