The volatility of economic activity in the United States has decreased over time
ID: 1139591 • Letter: T
Question
The volatility of economic activity in the United States has decreased over time, and especially since World War Il. Economists refer to this as the Great Moderation, and during this period expansions have gotten longer while recessions have gotten shorter. 1) What are some causes of this Great Moderation (reflect on current economics in the past 10 years Prior to the recent great moderation, we were going through a recession. Inflation was rising, and it was out of control. There are some causes to the recent Great Moderation in our economy, It's a mix of advances in production quality, changes in policy, and consumerism. Over these past years after the recession in the 1980s technology has.advanced faster more than any time in history. Things that could take a week to do could be done in a day at a fraction of the cost. When businesses are working at their PPF and are being efficient that allows higher wages and a better economy. Also. Policy restrictions against monopolies and forcing companies to pay fair wages and regulation let the economy flourish a little. People make up the economy and being payed fair allows people to buy things and consume. Changes in policy partnered with consumerism waš a big part of the most recent great moderation. The more money peopiles 2)Do you think this pattern can continue in the future (for the next 10 to 20 years)? (Support your answers with academic articles from the HCCC library website The Great Moderation according to time is something that happens constantly. There is a recession followed by a moderation then back into a recession. The pattern wave been in in the past ten years has been slow rising from the last recession in 2008. But personally. I do believe there will be a time where we wil have ther recession in our time, During the 1980s there was a great recession and income was stagnant and rs dig themselves in a hole due to overspending. I see this trend in the latest mortgage crisis which led to the last recession. And I don't see this trend ending. Due to more people going to college and receiving higher education it won't be as bad and wi better economically during recession than their counterparts 3) Can you think of any potential drawbacks to this development. or alternative changes that will need to be made in the future to continue the stability within the economy? Explain if these issues are even possible or hypothetical within your answer, and why There can be some things we can change in the future to keep the economy from collapsing. Historically recessions have happened for one very similar reason, Banks give away opportunities to uneducated consumers. To elaborate, the most famous great recession, the recession in the 1920s was due to banks giving people loans. People would take loans and not have money to pay it back. And after all everyone's money that was in the bank was lost and subsequently started the worst recession of all time. The most recent recession was due to banks giving away mortgages then the same situation. People couldn't pay it back and the economy fell. An alternative change that I think needs to be made is regulation of the policies that police banks. Banks can't be allowed to make fake promises to the people resulting in major debt. And on the other hand, people need to be educated in economics and finances and understand that although something seems enticing, it isn't a job idea. I think this is very possible and could potentially stop the recession with more people being financially responsible and awre and companies not being able to take advantage ill be better because people with higher education doExplanation / Answer
This case mainly talks about economic moderation and self correcting nature of econmics. It has shown examples from last 100 years that how economy has modelled itself to adjust with changing nature of time. We can also say that economic changes and technological progress along with the evolution of economic thought has happened simultaneously.
I partly agree with all the answers. All answers presnt only one side of ecomic analysis. For example first answer assumes that economic moderation will happen and it will be cure to present economic problems too.
However, it is not considering increasing use of protectionism and state intervention in markets. Trade war between China and USA and narrow mindedness all over the world is increasing. WTO is failing to resolve the disputes and this may lead to many problems like increasing income inequality and growth rates in developed and developing countries. It is true that technology is playing its role and making human life easier but it is also posing more problems like data theft.
In the second answer also education has shown to be answer but increasing unemployment and role of anti state factors is not considered. increasing intolerance against refugees and problems thereafter are also not touched. These are important events and may strain economy.
Again in the third answer banks are expected to maintain capital adequecy and follow financial prudence. This answer doen not explain why people do not repay loans and why insolvency among businessmen especially from developing countries is increasing. Banks are not independent and are always under pressure from the government.
Hence, thorough analysis is needed as an answer.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.