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Current State of Economy in the Us.

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Monetary policies effect

The monetary policies aids in the regulation of exports and imports of a country. In US, the monetary policies e.g. interest rates, lending limits, OMO e.t.c. The major impacts of the monetary policy in the US economy in relation to imports and exports include; Inflation regulation

When there is inflation in the economy, the interest rates are raised by Central Bank. This will reduce the amount of money in circulation thereby, reducing the value or cost of products. In so doing the Central Bank ensures stability in the exchange rate, therefore, making the imports and exports to be in balance.

Interest rates

When Central Bank increases or reduces its prime rate, that is rate it charges to banks on taking the loans, it ensures there is stability in the economy. Where the bank increases the prime rate, the amount of money the banks are willing to borrow will drastically reduce and in the short-run the amount tom be lend to individuals also reduces, this will regulate the imports made. The exports will be regulated when the Central Bank reduces the prime rate.

Business cycles

When the economy experiences a boom or a recession, the monetary tools will enable the minimization of the severity and speed in which the economy contracts and expands. The monetary policy will enhance a smooth and steady change to the next transition resulting from the negative or positive impact of these changes.

US budget for the past 5 years

The major estimate of expenditure, in USD billions, on various departments in the period of 5 years is as follows;

Department 2010 2009 2008 2007 2006

Defense 663.7 782 481.4 548.8 512.1

Social security 677.95 678 608 586.1 544.8

Medicare 453 323 342 394.5 345.7

Medicaid 290 353 233 276.4 268.4

Interest on National Debt 164 187 261 243.7 211.1

Other mandatory 571 607 324 448 218.1

Other discretionary 238 437 248 256 202.7

The major estimates of the receipts in USD billions from various departments are analyzed as follows;

Department 2010 2009 2008 2007 2006

Individual tax 1061 1210 1250 1100 966.9

Social security fund 940 949.4 927.2 869.6 818.8

Corporate income tax 222 339.2 314.9 370.2 220.3

Excise duty 77 68.9 68.1 65.1 75.6

Estate and gifts taxes 23 26.3 25.7 26 26.1

Custom duties 20 29.1 29.2 26.0 28.3

Others 47.9 50.7 47.2 41.6 16

The defense and security departments have always been allocated a large amount of money; this is due to the increased terrorists from major countries. For instance, in the year 2008 the government passed an ultimatum in the increment of its troops by 3000 personnel to Afghanistan. This was facilitated by the high budget allocation on the two departments. The medical facilities have tremendously improved in the US economy. Most US citizens can get free Medicare or with minimal expenditure. On the side of income, the US government acquires most of its revenues from the individual income tax either through the P.A.Y.E system. This has facilitated the ease in the collection of the revenues from individuals.

Personal Consumption Expenditure.

The unpredictable commodities like the energy usage and the foodstuffs can change in consumption due to the effect of seasonality and the non-systematic factors. These two factors are more often left out in the analysis of the PCE. For the period of 10 fiscal years, the PCE analysis can be tabulated as follows;

USD (billions) annual rate of change

Category 1998 2008 1998-2008 PCE 6125.9 8272.1 3.0

Durable goods 720.3 1188.5 5.1

Motor vehicles 338.9 387.2 1.3

Others 381.6 828.5 8.1

Nondurable goods 1794.4 2378.4 2.9

Services 3614.9 4714.2 2.7

Housing services 948.9 1182.5 2.2

Medical services 970.5 1374.8 3.5

Others 1695.9 2156.1 2.4

Source: Employment Projections Program, United States Department of Labor, United States Bureau of Labor Statistics

From the above information, the personal spending of a given economy will be inversely proportional to the personal savings. For instance, where an economy experience a high rate of personal spending then the economy cannot grow faster as the amount of investment in the manufacturing departments will be low. The US has experienced an increased PCE within the last decade; this is due to the increased population of the State. The housing services have also increased rapidly.







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