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U.S.: The Current Economic Status Term Paper

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Updated: Jun 19th, 2021

The U.S. is a developed country found in North America and it is one of the largest economies in the world. The economic performance of the U.S. five years ago was not good since the country began experiencing the global financial crisis. In 2007, the level of speculation in the country was very high thereby leading to the bursting of the bubble in the real sector.

The level of interest rates in the country in 2007 was 5%. However, the bursting of the bubble saw interest rates drop drastically to 2.8% in 2008 and 1.9% in 2009 before beginning to rise again to 2.5% in 2010.

The current interest rates in the U.S. are 3.2%. Although the rates are not high to attract large deposits, they encourage borrowing in the country (CIA Fact book, 2013).

Year Interest rates Inflation Unemployment (% of total labor force)
2007 5 2.9 4.6
2008 2.8 3.8 5.8
2009 1.9 -0.4 9.3
2010 2.5 1.6 9.6
2011 1 3.2 9
2012 3.2 2 8.2

The level of inflation is a significant indicator since it determines the level of consumption for goods and services. The level of inflation in the U.S. five years ago in 2007 was 2.9%. The rate rose to 3.8% in 2008 during the crisis but dropped to -0.4% in 2009. Thereafter, it began rising gradually to 3.2% in 2011 and it has been maintained at 2% in 2012.

Concerning the level of unemployment, the U.S. had a low number of unemployed workers in 2007 just before the financial crisis where it was 4.6%.

However, the crisis led to bankruptcy of many firms as many closed down and increased the level of unemployment in the country to 5.8%, 9.3% and 9.6% in 2008, 2009, and 2010 respectively.

Through government efforts, the rate of unemployment in the U.S. has been contained at 9% and 8.2% in 2011 and 2012 respectively.

Two Strategies to encourage Spending

The level of expenditure in an economy can be increased through various strategies. However, the most common strategy that could be exploited by the government is reduction of the interest rates. Reduced interest rates have various implications. First, depositing cash would not be attractive and people will withdraw their funds to spend on various projects.

Second, it would be cheaper to borrow funds and many investors would exploit this channel to increase borrowing so that they can invest in various economic projects. The overall effect of reduced interest rates would reduce unemployment levels in an economy.

The other strategy to increase spending would be the government initiative to establish various projects that will ensure that a large number of the active labor force is engaged. Such government projects would reduce unemployment with the employed people being able to spend their earnings on various products within the economy. This would increase demand on goods and therefore increase productivity.

Antitrust Policies applied in 50 years ago

Antitrust regulations have been applied for long with one common law, the Sherman Act of 1890 being applied throughout. The application of the act some 50 years ago saw enforcement of the law against price fixing and market cartels.

In the case, United States vs. Arnold, Schwinn & co. of 1967, antitrust regulations were enforced against vertical non-price restraints in which the manufacturer restricted retailers to a given region.

In 1972, the courts enforced the adoption of the exclusive sales territories by participants in joint venture marketing as per se unlawful in the United States v. Topco Associates, Inc. (Kovacic & Shapiro, 2000).

Two methods to identify customers qualifying for discounts

Customer loyalty is an important factor in establishing the market share of every organization. It is important that firms use all means to maintain their dominance as well as attract new customers. A discount is one of the methods that firms use to attract and maintain customers. In order to be fair while offering discounts, an organization can use various strategies.

It may begin by offering quantity discount to any customer purchasing goods equal or above a given value. For instance, a retail outlet could decide to offer a quantity discount on goods worth $40 purchased by any customer (Beetsma, 2004).

The other way to offer discounts could be through establishment of loyalty cards where units purchased by a customer are recorded every time the customer does purchases and at the end of a given period, the units can be used to purchase a given product or be rewarded with other gifts from the firm such as trips among other benefits. This will be fair to all customers and will increase their loyalty.

Three reasons for efficiency of a monopoly

Monopolies are corporations that have established themselves as the only producer or supplier of given goods and services in a given economic sector. They differ from perfect competition because under perfect competition, may firms exist in the industry and no firm is able to set its own price.

A monopoly could be inefficient since it sets its own price at which it supplies the products in the market. The firm sets a high price while limiting the total output that it supplies in the industry thereby reducing the consumer surplus. As noted by Taylor and Weerapana (2007), monopolies are not only known for inefficiencies.

They are known for earning abnormal profits that could be used in technological development. In addition, monopoly power is beneficial in innovation since such firms are dominant in their sectors in the industry and they focus on innovation. Examples include dominant firms in various industries such as GlaxoSmithKline, Toyota and Microsoft.

References

Beetsma, R. (2004). Monetary Policy, Fiscal Policies and Labour Markets: Macroeconomic Policymaking in the EMU. London: Cambridge University Press.

CIA Fact book, (2013). North America: The United States. Retrieved from:

Kovacic, W. & Shapiro, C. (2000). Antitrust Policy: A Century of Economic and Legal Thinking. Journal of Economic Perspectives, 14(1), 43-60.

Taylor, J. & Weerapana, A. (2007). Economics. (6 ed.). Stamford, Connecticut: Cengage Learning.

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