Economic growth is hindered when the government increases the debt limit while interest rates remain at an all-time low. In order for the economy to grow we must have a balanced approach. Fifth U. S. Increases the debt limit it forces citizens to pay more in taxes, especially with interest rates low, in order to pay for the debt. This causes a decrease in household income and reduces the amount that people can spend in the economy. Describe what would happen to GAP, the unemployment rate and the inflation rate if there is a decline in global growth.
If there is a decline in global growth it would have a negative impact on the employment rate. The decline would cause businesses to lay off workers which in turn would lead to people spending less in a market economy. Inflation rate could either rise or fall when there is a decline in global growth. When both unemployment and inflation is high the government steps in to correct the issue by means of stabilization policy (Masher & Pate, 2012).
Wok 2 Disk 2 Inflation is an important policy issue because it causes a redistribution of income and wealth, and discourages saving and investment. Discuss how inflation affects borrowers and lenders, asset prices, and households on fixed Incomes. Inflation, which is the rise of average level of prices, is an important part of agronomics. Price stability is one goal that is important in a market economy. Inflation can cause a lender to lose money if inflation increases, but on the other hand the borrower gains.
If the opposite were to occur, inflation decreases, the lender would increase their money and the borrower would lose money. One example of this would be mortgage rates. If a borrower bought a house when interest rates were 5% and they had a fixed loan and then a year later interest rates dropped to 4% then the lender would come out with more to gain and the borrower could stand to lose a significant mount with the higher interest rate. Physical assets such as real estate and jewelry’ will tend to see a rise in prices during inflation increases.