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Demand And Supply In The Macroeconomy

2372 words - 10 pages

Demand and Supply in the Macroeconomy

ECON 372

Demand and Supply in the Macroeconomy

The current state of our economy in the United States is no secret to anyone. In the United States over the past couple years, the economy has been lower than ever and not increasing as it should. Gas prices are at an all time high, home prices are at an all time low, and unemployment rates continue to stay on the rise. We’re still the largest and most powerful country in the world and our GDP holds steady at $47,200. That is an increase of 1.9% for the first quarter in 2012. The consumer spending rate has increased, although still not at a high for the United States. The current consumer ...view middle of the document...

In today’s economy the unemployment rate according to (Zukerman, 2013) it is about 14%, not 7.5% as the news headlines put it. Zukerman, say the 14% is due to the government not adding all the unemployed people who are actively looking for work or those that are not looking. If the government were to put these type of numbers it might slow down our progress even more because organizations and employers will not want to hire workers due to the lack for demand of supplies therefore slow production on goods and services. In terms of unemployment and the affects it has on the economy, as just mentioned unemployment affects the supply and demand. The aggregate supply and demand curve would shift to the right left because of less people working, meaning there is people with less money and therefore they cannot go out and spend money on things like a day in Disneyland or going to a restaurant to have a nice dinner. What does this mean in the economy, it means the country’s Gross Domestic Production(GDP) is low, according to (Zuckerman, 2013) the current GDP is around 2% very low for the country, it should be trending between 7-10% to be effective and put the country’s economy out of recession or at least back to the starting line.
Expectations
Currently within the US economics news reported by PNC Financial group for the month of July 2013 is a slightly improved Jobs outlook but still has slow GDP growth. The current growth was revised down to a 1.8 percent for the second quarter (Another Good Employment Report despite Soft GDP Growth). The expectations for the third quarter are to see much of the same and although economic optimism is slowly improving we will not see and major game changers in 2013. Therefore demand will remain stagnant with looming uncertainty in healthcare, regulatory, taxes, and consumer confidence This uncertainty especially within the fiscal policy regarding regulations, the Affordable Healthcare act, and unresolved tax implications has a very real look of contractionary fiscal policy. No new stimulus is proposed as the administration wrestles with scandals and policy arguments over immigration. This lack of focus on any new federal stimulus will take the shape of moving the aggregate demand curve to the left as demand will remain weak with companies remaining uneasy about pursuing large purchase or seeking new lines of credit. This will do little in the way of supply as supply will most likely follow demand and remain stagnant that will leave prices dictated by market forces such as fuel prices, consumer confidence, and the Consumer Price Index.
Consumer Income
Consumer income has a direct correlation to aggregate supply and demand because it has a direct effect on the propensity of the consumer to exhibit frugality when income levels are low or to spend on luxuries that they may not necessarily need but feel is appropriate due to the excess income when income is higher. Consumer expenditure is determined by a...

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