Saturday, October 2, 2010
US growth in 2nd quarter still stagnant
Economic growth in the second quarter has been revised to 1.7 percent, up .1 percent from the last projection, but this is down substantially from the first quarter and down from much of last year's figures on growth. This is an indication for many economists that the economy is slowing down from the momentum it gained from the 2009 stimulus. Also, many economists see this as an indication that unemployment will remain at or around the current level of 9.5 percent. According to the article, consumers are saving at a much higher rate than they were before the financial crisis, and the drop in MPC has led to a reduction in sales that has prevented employers from hiring again. Fortunately, the number of those applying for unemployment benefits has dropped slightly, indicating that while firms have not been confident enough to hire more people, they have been able to hold on to their current employees.
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The Marginal Propensity to Consume is decreasing since the stimulus a year ago. Furthermore, since consumers are not purchasing, businesses are reluctant to hire labor. What can the economy do to once again stimulate the economy to decrease Unemployment. Do you think an Expansionary Monetary policy needs to be enacted?
ReplyDeleteMPC has been decreasing because of consumer confidence. If people dont think they will have a job next month they are not going to spend their money, also their is no confidence in the banking sector because the banks have a fear of people defaulting on their loans, so they are not willing to lend money out. I think a monetary policy would not hurt, even if it increases inflation since we are almost at levels of deflation.
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