Economics Assignment: Analyzing Income, Employment & Fiscal Policy

This economics assignment solution delves into the analysis of income and employment levels in the short run through the interaction of aggregate demand and aggregate supply curves, particularly within the context of the United States' mixed economy. It explains how the Keynesian Theory of Employment influences output and prices based on demand. The solution further differentiates between monetary and fiscal policies, providing examples of their impact on economic growth, employment, and price stability in the U.S. Recommendations for increasing economic growth, such as expansionary monetary and fiscal policies, are also discussed, emphasizing the importance of reducing interest rates and ensuring full employment to enhance income and job prospects. Desklib provides a platform for students to access this and other solved assignments for academic support.

Running Head: ECONOMICS
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Economics
2/2/2019

ECONOMICS
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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.

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Q3.
In context to the growth of economy of United States, it can be stated that the goals of the job
creation strategies is stimulation of the healthy economic growth within country. The
recommendations which can be provided to the president of the United States, for increasing
the rate of economic growth, can be in terms of expansionary monetary policy and fiscal
policy. The government must emphasise reducing the rates of interest. This means reducing
the rates of the fed funds rate, for the purpose of increasing money supply. It leads to an
increase in the liquidity, and the money lending capacity of the banks. With the cheaper rates
of credit, the consumers are able to spend further companies meet the increasing demand.
In addition, ensuring the practice of full employment in the country may facilitate in
enhancing the levels of employment, and income within country. Full employment can be the
single largest policy which can help and raise income and employment prospects for the
highly disadvantaged people. However, fiscal policy is the major aspect and most powerful
way of creating jobs within country and increasing the levels of economic growth
(Ryscavage, 2015).

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References
Baker, S.R., Bloom, N. and Davis, S.J. (2016) Measuring economic policy uncertainty. The
Quarterly Journal of Economics, 131(4), pp.1593-1636.
Guttmann, R. (2016) How Credit-money Shapes the Economy: The United States in a Global
System: The United States in a Global System. United Kingdom: Routledge.
Keynes, J.M. (2018) The general theory of employment, interest, and money. Berlin:
Springer.
Ryscavage, P. (2015) Income Inequality in America: An Analysis of Trends: An Analysis of
Trends. United States: Routledge.