Economic Critique - Aggregate Supply and Demand

Economic Critique

Team D

April Parker-Allen, Lisa Deane, Tanya Beeler, and Rebecca Isfan

University of Phoenix

ECO/372

Instructor Ted Haas

July 31, 2013

Economic Critique

There are many key factors that contribute to the present- standing of America’s economy, including unemployment, expectations, consumer income, and interest rates. These factors are putting an impediment on the current collective demand and supply. Because of this, the United States government has recommended certain fiscal policies to be put into place in hopes of putting the economy back on its feet. Analyses of the United States economy are viewed from two opposing perspectives, the Classical, and Keynesian economics.

The unemployment rate in the United States is currently at approximately 9%, which is more than double what it was 10 years ago (Sicilia). According to Federal Reserve Chairman Ben Bernanke, the unemployment problem is mainly because of a continued weakness in aggregate demand which he believes could be remedied by replacing the lost demand through aggressive policy (Mark, 2013). Many American’s are finding it hard to find steady employment; this causes them to save money, which lowers the demand for consumer goods. The lower demand in consumer goods causes businesses to decrease in production, which in return leads to potential layoffs. In the past year the United States has seen fiscal policies that have contracted the economy, which was done in the hopes that although the short-term unemployment would rise, in the long-term there would be a decrease in unemployment. Some Keynesian economists believe that the Federal Reserve’s monetary policies have been too accommodating and that tighter policies could aid in the recovery of the economy. They also believe that in order for the economy recover the government will need to increase their spending. Classical economists believe that less is more and that government spending is not a major force in the success of the economy and can damage it.

The United States economy is highly developed, diverse, and modern, which is why it is viewed as a major economic power and has only Japan as a major opponent. The United States ranks first in the world concerning foreign trade and at the end of the twentieth century the United States became the first country in the world that collected revenue from tourism (www.referatele.com, 2013). Although the United States was a major player in the economic world, it is currently in a very fragile economic state.

Matters concerning how the economic expectations affect aggregate supply and demand seem to depend on how citizens view the