Description
Purpose of Assignment
Week 3 will help students develop an understanding of what money is, what forms money takes, how the banking system helps create money, and how the Federal Reserve controls the quantity of money. Students will learn how the quantity of money affects inflation and interest rates in the long run, and production and employment in the short run. Students will find that, in the long run, there is a strong relationship between the growth rate of money and inflation. Students will review the basic concepts macroeconomists use to study open economies and will address why a nation's net exports must equal its net capital outflow. Students will demonstrate the relationship between the prices and quantities in the market for loanable funds and the prices and quantities in the market for foreign-currency exchange. Student will learn to analyze the impact of a variety of government policies on an economy's exchange rate and trade balance.
Assignment Steps
Resources: National Bureau of Economic Research
Develop a 2,100-word economic outlook forecast that includes the following:
- Analyze the history of changes in GDP, savings, investment, real interest rates, and unemployment and compare to forecast for the next five years.
- Discuss how government policies can influence economic growth.
- Analyze how monetary policy could influence the long-run behavior of price levels, inflation rates, costs, and other real or nominal variables.
- Describe how trade deficits or surpluses can influence the growth of productivity and GDP.
- Discuss the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan.
- Recommend, based on your above findings, whether the strategic plan can be achieved and provide support.
Use a minimum of three peer-reviewed sources from the University Library.
Format your paper consistent with APA guidelines.
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
Attached.
Running head: ECONOMIC OUTLOOK FORECAST
Economic Outlook Forecast
Names:
Institution:
1
ECONOMIC OUTLOOK FORECAST
2
Economic outlook forecast
The Macroeconomic environment of every country is very important when it comes to
forecasting the future of the economy and other economic forces. However, it is also equally
important to consider the past trends in various forces so as to appropriately forecast the future
trends of the same. At the same time, D'Costa, Garcilazo & Oliveira (2013) insist that it could be
difficult to make strategic plans to model the macroeconomic factors without an understanding
the various underlying factors. In fact, the economy is highly susceptible to various changes that
differ from time to time. In the 2000s, for example, the Great Recession affected various
economic forces in the world, and that led to a drastic rise in the inflation rate while many
companies recorded low outward monetary flow and a decline in their GDPs (Adkisson &
Mohammed, 2014). In the present decade, however, many countries have managed to recover
from the recession at varying degrees. This paper will analyze the trend in recent and forecasted
changes in various economic forces in the US and how they are set to affect the economy in the
long run.
Analysis of historical changes macroeconomic forces and a five-year forecast
The US is inarguably the largest economy in the world. At $19.42 trillion, the US
economy constitutes 25% of the gross world product (Bajpai, 2017). This makes it the most
important economy in the world, and where its domestic economic forces can have devastating
effects across the world. Similarly, its large size makes it susceptible to macroeconomic changes,
although Scrimgeour (2015) insists that it is also highly resilient, giving it the ability to recover
relatively faster than most other economies.
ECONOMIC OUTLOOK FORECAST
Changes in GDP growth
The US GDP growth has been fluctuating significantly in the recent past. As can be seen
from figure 1 below, the US GDP growth is highly dependent on various factors that affect both
the inflow of cash, the outflow, and the federal expenditure. Among the major changes include
the period between 2008 and 2009, and where the financial crisis and the accompanying
measures by the federal government led to a decline in the GDP. However, the GDP has been
growing steadily, although it was affected slightly by the recent presidential polls in the year
2016. Regardless, the Woodward (2013) forecasts that the GDP will grow at an average rate of
2.6% for the period leading to 2022, which is significantly higher than the rate of the period
between 2002 and 2012 that averaged at 1.6%.
Figure 1: Changes in US GDP and major events affecting the change
Source: Amadeo (2017)
3
ECONOMIC OUTLOOK FORECAST
Savings and investment
Savings and investment have been fluctuating similar to GDP in the recent past. In
savings, however, data reported by Cole (2014) show that the private saving has been
accompanied by a similar or nearly equivalent value in the government borrowing. As can be
se...
Review
Review
