WHAT CAN BE DONE TO STIMULATE US GROWTH ??



INTRODUCTION

Economic growth is a term generally measured by the amount of production in a country or region over a certain period of time. If the GDP of a country one year is $100 billion US Dollars (USD) and the next year is $125 USD billion, then there has been economic growth of 25 percent. If, on the other hand, the GDP was only $75 USD billion, the growth would be negative 25 percent. Most consider economic growth to be one of the surest signs of a country’s overall health. Economic growth means different things to different people. The US economy is experiencing problems and the threat of a recession is only one of many problems affecting the US economy. The US economy ground to a virtual halt in the first half of the year, with consumer spending at its weakest level in two years.

PROBLEMS FACED BY ECONOMY


• One of the major problems is lack of demand in the economy.
• There has been a rise in the savings rate that has persisted since the recession.
• There is still a massive overhang of housing debt and House prices have fallen by 30% in some areas.
• People don't want to take on more debt, so there is demand deficiency problem.
• The unemployment rate is projected to continue rising for another year, a prospect that threatens to slow growth and increase poverty
• Current Account Deficit $857 billion equivalent of 6.5% of GDP.
• Loss of confidence in banking system due to bad loans.



Steps to stimulate growth

• Fed can do is lower long-term interest rates even more. It won't be a huge boost, but it will help.
• To raise asset prices and lower borrowing costs.
• The Fed could help debtors refinance on very favourable rates.
• Further quantitative easing would be the US Federal Reserve’s most effective tool if it needs to do more to stimulate the US economy.
• Cutting short-term interest rates discourages saving and encourages borrowing, boosting spending
• By lowering government expenditure.
• Raise the inflation target from its current 2% rate.
• Buying mortgages, municipal bonds and other types of debt, instead of government debt.
• Promising to keep short-term rates low for longer, or until certain conditions are met, in order to lower medium-term rates.

CONCLUSION
The problems faced by the US economy were both avoidable and unavoidable To overcome these problems ,steps like lowering long-term and short-term interest rates ,raising inflation target, raising asset prices and lowering borrowing costs can be used and tools like quantitative easing can be implemented. Though it will take some time, but if all these measures are put into practice honestly, the economy can shape upwardly in the coming times.

SUBMITTED TO – MR. GURDEEPAK SINGH
SUBMITTED BY – NAVREEN SANDHU
CLASS- MBA 1(B)