AD/AS Models, U.S. Economic Critique
ECO/372
April 20, 2015
Professor Godwin Quashigah

AD/AS Models – U.S. Economic Critique

The U.S. economy is primarily based on aggregate demand and aggregate supply (AD/AS), and significantly influenced by the factors of unemployment, expectations, consumer income, and interest rates. In addition, fiscal policies introduced by government leadership can affect the economy if they are effective. In the following paragraphs, we will examine the current state of the four factors above and how each affects AD/AS. Further, we will identify important fiscal policies currently being recommended by government leadership and evaluate those recommendations from the Keynesian and the Classical economic model perspectives.

Unemployment Unemployment is an important statistic used by the U.S. government to gauge the health of the economy. Defined by the Bureau of Labor Statistics (BLS), the unemployment rate includes people who do not have a job, have actively looked for work in the past four weeks, and are currently available for work, including people who were temporarily laid off and are waiting to be called back to that job (Bureau of Labor Statistics, 2015). Those who have not looked for work within the past four weeks, and marginal workers that have given up searching for employment, are no longer counted among the unemployed and removed from the labor force total. In the United States, there are currently 13.5 million individuals that are classified as unemployed. In March 2015, the unemployment rate remained at 5.5%, which is closer to the natural rate of employment of 4%, with long-term unemployment at 30% of the 5.5%. The real unemployment rate is higher because it includes the unemployed, marginally attached, discouraged workers, and part time employees; it remains at 11.0% (Amadeo, 2015). When that many people