In this letter the overall message is to say that the economy is currently becoming better and is predicted to continue growing. The word that is used many times throughout this letter is “slack”, which they are using in the case that there is room to grow within the economy. Based on what I know and correlations between the current state of the economy and their predictions of the economy, I agree with what is stated in the letter although in most cases their number are off. One broad indicator that shows evidence of this are the spending habits of household. These habits can be seen within housing startups and vehicle sales. These two markets are widely affected by interest rates and the rates of unemployment. When these two markets …show more content…
These two markets give a good idea of how confident and willing to spend households are. Housing startups have increased from 1.00 million in 2014 to a current 1.13 million and are expected to increase to 1.23 million units in 2016. With houses being one of the largest expenses to a household housing startups are a great way of measuring the economy. Vehicle sales have also been increasing from 16.44 million in 2014 to a prediction of 16.8 million at the end of the year (currently at 16.3 million) and are predicted to increase to 17.3 million in 2016. Both of these purchases are large enough to households to show the confidence that they have within the economy therefore they are great indicators for how the economy is …show more content…
In the letter it the real GDP in 2015 was predicted to be at only 2.6% growth but if we look at the actual number for real GDP growth it was at 3.9%. With this being said GDP is still expected to grow into the 2016 year. This can be seen true with production outputs rising from a low of -1.5% at the start of 2015 to the 3.3% now. The one thing that could hinder the growth of GDP could be the growing strength of the US dollar in foreign countries. This strengthening of the US dollar will cause exports to go down and imports to go up. This will cause the GDP to go down due to less production happening. This is one of the only things stated in the letter that could possibly hinder the growth of the economy. Overall, this Fed memo says that the economy is still on a rise since the recession with slack in many different markets. This can be seen in the growing GDP, the increasing housing starts and vehicle sales, lowering inflation, and the overall strengthening of the economy. I do agree in what this letter is trying to say based upon what I know in economics, what the economy is doing currently and how it correlates with the Fed