Analysis of Income and Employment Levels in the United States

Running Head: ECONOMICS
0
Economics
2/2/2019

ECONOMICS
1
Q1.
In the reference of the question it can be stated that the levels of income and employment in
the short-run are analysed through the interaction of the aggregate demand curve (AD) and
aggregate supply curve (AS). The income and employment theory leads to the analysis of the
relative levels of output, employment, and the prices within an economy.
In the country, United States, the levels of income, employment, and others like output and
prices of the product are determined through the Keynesian Theory of Employment (Keynes,
2018).
In context to the theory, in United States it has been understood that the higher/lower is the
national output the higher/lower is the volume of employment. The United States constitution
has established the system of mixed economy, where the output, prices are determined by
focusing on the element of the higher demand of people for the goods and services produced
in the country. From the sale of the output at each different levels of employment, the country
focuses on determining the prices (Guttmann, 2016).
Q2.
The aspect of monetary policy involves making change in the interest rates, thereby
influencing the money supply. Whereas, Fiscal policy refers to the decisions of government
in consideration to the taxing and spending which influences overall demand of the economy.
Monetary policy within United States constitutes of the actions of Federal reserve’s and
communications promotes employment, price stability, and moderates the interest rates in
long-term (Baker, Bloom and Davis, 2016).
Two examples can be stated in context to the fiscal policy of the US economy, which led to
the cutting of tax rates, and making increased government expenditure. Monetary policy
positively influences, and ensured growth in terms of the factors such as spending in terms of
household, business investment, production, employment and the rate of inflation. Therefore,
these analysing the policies in United States it has been understood that the country attains
three goals of full employment, economic growth, and stability of prices to a certain extent.