Aggregate Demand and Supply Models

Introduction Social, technological and political changes in the US and around the world affect the U.S. economy today. Even if the U.S. economy presently remains as one of the world’s largest economy, the country is now in deep recession and must The purpose of this paper is to understand the prevailing economic trends in the US particularly on unemployment, interest rates, and consumer income including the expectations of both the consumer and business sectors. This paper will also discuss the effect of these economic indicators on the aggregate supply and demand and the evaluation of current fiscal policies that were recommended by the government. This paper aims to let future business managers be aware of the importance of comprehending current US fiscal policies as it outlines the blueprint of change to the US economy.
Current Economic Trends
Unemployment is a term that you will hear often when spending time in any city in the United States. It is an issue that is spoken of from the dinner table to the oval office. The United States experienced its “worst downturn since the Great Depression” but continues to recover adding 176,000 jobs to the private sector in March-April 2013 and reducing unemployment to 7.5% (Bureau of Labor Statistics, 2013).
President Barack Obama has introduced large plans to reform banking in America. The people of the U.S. expect to see banks become more regulated, they expect that home loans will be reasonable, they expect that the White House will follow through on their promises to ensure banks and credit card companies are fair, and they expect that they will be able to keep their homes. They also expect that they will have jobs to go to soon.
The president also has plans to raise the minimum wage, something that has not happened in a while. Currently, a full-time employee earning minimum wage is living in poverty. President Obama says that “no one who works full time should have to raise their family in poverty” and he plans to raise the minimum wage from $7.25 to $9.00 per hour.
President Obama has introduced legislation for many issues that American families are facing in today’s economy. One issue that has been prevalent recently is the interest rate on student loans. Pursuing higher education means that our children receive their degree with debt that will take years to pay off. This is unacceptable to President Obama. He says that “making it harder for our young people to afford higher education and earn their degrees is nothing more than cutting our own future off at the knees. Congress needs to keep interest rates on student loans from doubling, and they need to do it now.”
Effects on Aggregate Supply and Demand
Supply and demand are a huge part of the nation. Whether it is the suppliers or the goods that are produced and purchased the curve goes up on any scale. By saying this, the cost of our living, goods and anything else we choose to purchase only seem to go up as long as they are being purchased. At times there is a slight decrease in demand. One example for this is gas. Throughout a year gas prices change more than 67%, and only continue to go up. This information was actually asked of by a manager at Maverik gas station, in Nampa Id, named Carol Thacker.
Current Fiscal Policies The United States economy has always been one that strives for equal job opportunities among its citizens. Within the discussions and at times debates the fiscal policy is one of the primary focuses. The fiscal policy is the planned change that the government spending or taxes to generate or hinder the economy (Colander, 2013). The current president of the Untied States of America, President Obama, had taken the responsibility to work on five major points within fiscal policy: deficit reduction, regulatory reform, health care reform, tax reform, and cutting waste (The White House, 2013). President Obama signed into law a bipartisan agreement that allows within the next 10 years saves the United States almost $1 trillion in spending. The United States government has researched and review over 580 proposals to lower regulatory cost and federal policies in order to create a 21st regulatory system (The White House, 2013). In other efforts within the fiscal policy the United States of America government has been strictly enforcing the Affordable Care Act to crack down on those that are abusing, wasting, and of falsely accessing Medicare and Medicaid. Tax reform has allowed for everyday citizens that do not have an annual income of more than $1 million pay a smaller share of taxes than other citizens providing tax fairness throughout the Buffett Rule (The White House, 2013). Eliminating wasteful spending is an important aspect of any economy and the United States of America is on a mission to find unnecessary spending including information technology and excess federal real estate (The White House, 2013).
Evaluation of Recommendations
The five major points within the current U.S. fiscal policy: deficit reduction, regulatory reform, health care reform, tax reform, and cutting waste reflect a blend of policies favored by Keynesian and Classical model perspectives. These perspectives from “two groups of macroeconomists: Keynesians (who generally favor activist government policy) and Classicals (who generally favor laissez-faire or non-activist policies)” (Colander, 2010, p. 159) aim to outline the best method for ensuring economic growth.
Reducing the deficit would be a recommendation that Classical macroeconomist would favor. The Classical theory argues less intervention from the government, including social programs which can cause a country to go into debt. This laissez-faire policy, a term in French that means “Let events take their course; leave things alone” (Colander, 2010, p. 34) would also support the fiscal policy of cutting wasteful spending and regulatory reform.
Unlike Classical macroeconomist Keynesians believe that it is the government’s responsibility to control fluctuations within the market. This type of control is believed to safeguard the economy’s growth and prevent high inflation rates. A Keynesian macroeconomist would endorse the government intervention of health care reform, which includes controlling the cost of health care for Americans. The Tax reform fiscal policy would align with Keynesians’ theories, this policy requires higher earners to be taxed at a higher rate. In contrast a Classical macroeconomist would argue that less taxation would allow people more money to spend, boosting the economy.
Conclusion
The effects of fiscal policies may not have the same impact to everyone but each individual must have a clear understanding how these policies increase taxes or dictate the expenses of the government which could affect the money in circulation. These policies may have possible positive or negative effect in the long run and U.S. economy may progress or slow down through high unemployment levels and interest rates. However, everyone must also trust the government as these policies only aim to balance spending and taxation levels as well as evenly managing various business cycles.
All throughout this paper the researchers have learned the various effects of unemployment rate, interest rates, and consumer income including the expectations of both the consumer and business sectors to the economic trend and aggregate supply and demand. It was concluded that business managers must have a great understanding of the fiscal policies in order for them to align their businesses plans and adhere to the current policies as leaders try to sustain a variant economy to which our country’s well being depends on.

References
Colander, D.C. (2010). Macroeconomics (8th ed.) Boston, MA: McGraw-Hill/Irwin.
The White House. (2013). Reform & Fiscal Responsibility. Retrieved from http://www.whitehouse.gov/economy/reform#sub2-tab
The White House (2013) Jobs & The Economy: Putting America Back to Work. Retrieved May
25, 2013 from http://www.whitehouse.gov/economy.
Bureau of Labor Statistics, 2013. Retrieved from http://www.bls.gov/news.release/pdf/empsit.pdf
Aggregate demand, Retrieved from http://tutor2u.net/economics/revision-notes/as-macro-aggregate-demand.html