Federal Reserve

The Federal Reserve

1. Describe and explain the cause of any inflation (or lack of) over the last year.

Mankiw states that the there is little likelihood of the Fed's aggressive behavior to restart the economy will lead to an out of control inflation even in juncture with a weak economy. He does allow that it is certainly possible in the long run but just not now. According to Mankiw the slack labor market has generated lower wages. This lower wage is a benefit for the typical company. "A persistent inflation problem is unlikely to develop until labor costs start rising significantly (Mankiw, 2011). The period of stagnation in labor costs is not what is happening now, as it did during the 1970's. In Minkiw's opinion "the Fed is on the right track worrying more about the weak economy than about inflationary threats" (Mankiw, 2011).

Mankiw, G. (2011). I Am Not Very Worried About Inflation Just Now. Retrieved from: http://economistsview.typepad.com/economistsview/inflation/

2. Describe and explain the trends in unemployment over the last year.

The Bureau of Labor Statistics released its September data on Friday, October 7. The rate remains at 9.1%. There was an increase in employment by 103,000 jobs, nearly half due to the return to work by striking telecommunications workers. (BLS, 2011). Unemployment reached its peak of November 2010, looking back over the past 13 or so months. There was a sharp decline through March 2010, reaching a low of approximately 8.8%. Since that time it has risen and stayed at a relatively flat rate, hovering at 9.2 – 9.4 %. "The recent recession "officially" ended in June 2009, but the continuing weakness and lack of job growth convinces many that the recession continues or is back. GDP growth has been very weak in 2011" (Council for Economic Education).

Bureau of Labor Statistics. (2011). The Employment Situation – September 2011. http://www.bls.gov/news.release/pdf/empsit.pdf

Council for Economic Education. (2011). Focus on Economic Data. Retrieved from: http://www.econedlink.org/lessons/index.php?lid=1040&type=student

3. Report on the current interest rates. Address the fed funds rate, the ten year treasury rate and the 30 year treasury rate. Explain how and why they have changed over the last year.

The current Federal funds rate is at .25%. It has remained at this rate for over a year. (Bankrate.com, 2011). As of October 7, 2011 a 10 year treasury note yielded 2.07% with a 30 year note yielding 3.02%. Both of these are up over previous periods. However, in reviewing the data over the course of the last year one finds the peak in February, 2011 for all three of these economic indicators. (Short, 2011).