Economy, Monetary Policy and Monopolies the Benchmark Essay

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Economy, Monetary Policy and Monopolies

The benchmark interest rate currently stands at 0.25% compared to 0.2500 that was registered in January 2011 (Trading economics, 2012). Meanwhile, the annual inflation has remained unchanged at 1.7% in June 2012. Inflation rate, here, means a general rise in prices measured against a standard level of purchasing power. GDP deflator and CPI are the most common measures of inflation. CPI measures consumer prices where as GDP deflator measures inflation in the entire domestic economy. Consumer price index for the urban consumers remained unchanged in June, 2012 albeit on a seasonally adjusted basis.

The last 12 months before June, 2012 registered an all items index of more than 1.7% before seasonal adjustments. The decline in index was offset by increases in indexes of for food and all items less food and energy. There was a fall in the energy index by a margin of 1.4%. Meanwhile, the gasoline index declined for the third month in a row. Other energy indexes nonetheless remained mixed. Food index however rose 0.2% in June. There was a rise of 0.2% in index for all items less food and energy in June, 2012, the fourth consecutive such increase. The index for used cars and trucks remained unchanged after a series of increases. However, the index for airline fares declined in the month of June 2012. Indexes for both medical care and apparel and recreation both rose in June. That for medical care registered the largest increase since 2010 (Trading economics, 2012).

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Unemployment rose by 163, 000 in July 2012. The U.S. Bureau of Labor Statics records indicate that unemployment rate stood at 8.3%. In July 2012, unemployed persons were averaging 12.8 million, an indication that much has not been done to curb spiraling unemployment. Unemployment rate among the Hispanics was 10.3% in June. However, in July, this edged down. Unemployment rate for adult men was 7.7%, adult women 7.5%, teenagers 23.8%, whites 7.4%, and finally blacks 14.1%. These percentages showed little or no change compared to previous months. Unemployment rates for Asians were 6.2% in June. In July, 5.2 million people had remained jobless for 27 weeks and over. This category comprised the 40.7% of the unemployed. Involuntary part time workers were 8.2 million in July. They were working part time because their hours had been cut back. Some were unable to find full time jobs (Bureau of Labor Statistics, 2012).

To create employment opportunities, the government can use monetary tools or fiscal policies. The government can engage in printing of more money. This money can be lent to the economy at very low interest rates. This makes it very cheap to borrow money. When this money flows in the economy, it creates growth. Care should however be taken not to create inflation in the economy. Well crafted fiscal policies can also help reduce unemployment rates. This revolves around how the government taxes and spends its revenues.

The federal government can slow down the.....

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