Economic Final Project Paper

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Running Head: ECONOMIC FINAL PROJECT PAPER

Economic Final Project Paper
University of Phoenix
ECO/372-Principles of Macroeconomics
Professor Wawa Ngenge
March 23, 2009

Economic Final Project Paper
The current economy has hurt many retail businesses. Every month another retail giant closes its doors. Retail stores which we never would have imagined have gone bankrupt. Retail sales have declined greatly. Major cause of this declination is because many people are unemployed and cannot afford to purchase anything. Retailers are forced to discount prices to increase sales, but discounting still hurts margins. Retailers are assuming a very demanding situation through the remainder of this year, and the unpredictable direction of the current economy makes forecasting the future performance very difficult. It will take awhile for the retail industry to recover. There are different steps they can take. In order for an industry to survive they should perform SWOTT Analysis. This will determine what their strengths, weaknesses, opportunities, and threats are. This analysis will aid them in surviving against other retail companies. The Real GDP will help the retail industry to determine the current health of the economy. Unemployment rate and inflation also play large role in a retail industry’s survival. Impact of Past and Current Fiscal Policies

When a government increases taxation or decreases spending in an effort to manipulate the economy; it is participating in fiscal policy. Fiscal policy is generally used to control the productivity levels of the economy through taxation and government spending. Governments use fiscal policy, in conjunction with monetary policy, in an effort to control parts of the economy such as GDP and inflation. Many times when economic policy is used it will only affect a small portion of the overall economy. Tax breaks for seniors, people with children or business owners are all examples of economic policy affecting a small portion of the population. The government uses these changes in the economy in an effort to reach its desired outcome (Weil, 2008). Fiscal policy plays a major role in every area of the modern world. From Wall Street to Main Street, fiscal policy is shaping the way that we live, as well as the way in which we interact with one another. Changes in fiscal policy may seem small to the naked eye, but minor adjustments to spending or taxation can have an impact felt around the globe. The retail sector has had its share of ups and down over the past decade, many of these due to fiscal policy, and its cousin, monetary policy. In early 2000, the economy was starting to gain momentum. Consumer spending was starting to pick up, as were consumer confidence levels. Low tax rates and a reduction in vehicle tariffs helped the American household to have more disposable income. The abundance of cheap credit, a historically low savings rate and a housing boom also helped with growth in the retail sector. This would eventually all add up to major economic growth in the retail sector and the overall economy (Kerr, 1999). Unfortunately, because of the debt-based model that the United States is currently operating from, this economic growth could not be sustained. The Federal Reserve Act of 1913 and fractional lending standard have created a system where economic growth and decline shoot up and down like a bouncing ball. This is due to not only the monetary, but also the fiscal policy that is currently in place. The United States quickly lost all of the gains it saw during the boom cycle as it has done in the past and will continue to do so in the future as long as the current fiscal and monetary policies are in place (Carmack, 2008). In contrast to the budget surplus of recent times, the U.S. now has an ever-increasing budget deficit. All future projections show the U.S....
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