The Fiscal and Monetary Policy and Economic Fluctuations



The Fiscal and Monetary Policy and Economic Fluctuations

Answer - 1

There have been many changes in the world economy in last five years. USA is claimed to be the largest economy in the world and it cannot isolate itself from the economic crisis that has been looming for just about 5 years. The turning point was said to be circular debt and mortgage crisis that has since then hampered the progress of the USA economy. The interest rate outlook in USA is one of the first thing that is needed to be looked at. Currently the USA ranked second out of three countries in the North America region and ranks 10th in the World (The Heritage Foundation, 2013).

Answer - 2

Since 2008, as it marked the beginning of financial and economic crisis for USA, the first step that was being taken by FED was to make sure that inflation should not run rampant. And they followed it with conventional measures as they have declined the interest rates. In 2008, it was seen that USA interest rates were lowest in their history and it was a period in which inflation was one of the main concerns for the economy. Interest rate was lying between 0 to 0.25 % in that time period.

Thus interest rates were kept on the lower side, and as history suggests, one of the most important variable that economy needs to look and take care of is that to make sure that inflation was under check. It can be seen that these methods were really successful to a certain extent and the strategy worked really well. Inflation that was lingering around 4.5% in the midst of 2008. The situation has changed pretty drastically since then and inflation has halved since that time period ...