The Chief Economic Advisor, Essay Example

Economic recession is caused by a number of factors, most of which can be influenced by the implementation of economic policy. However, there are some instances when government involvement in economic facets causes the tendency towards a recession. It is important that government maintains the balance in these conflicting economic facets.

Deregulation of Markets (Capitalism)

Too much market regulation causes the tendency towards a recession. In order for government to ensure a positive economic environment, some industries have to be deregulated, especially those that are controlled by monopolies (Blanchard & Johnson, 2013). By creating an environment where competition dictates the trends the markets assume, prices will go down, as quality increases and variety is brought into the different markets. This allows consumers to choose between a wide range of products at an affordable cost.

Unemployment

After the deregulation of markets, industries will open up, creating the much needed employment to counter the prevailing 13% unemployment rate. The introduction of new players into the different markets creates the prospects of available employment opportunities for the labor market.

Balance of Trade

The balance of trade is an important indicator as to the health of a given nation’s currency. The value of a given nation’s currency largely depicts the strength of the economy. In order for the United States to realize economic stability, it has to ensure a positive balance of trade (Hubbard & O’Brien, 2013). This is because a negative balance of trade depicts negative implications on the value of the dollar.

Keynesian Principles

By deregulating the markets, the government will have triggered an increase in output that will translate to an increase the flow of currency within the economy. This will trigger an increase in consumption that is as a result in increased demand.

References

Blanchard, O., & Johnson, D. R. (2013). Macoreconomics. Boston: Pearson.

Hubbard, G. R., & O’Brien, A. P. (2013). Economics. Boston: Pearson.

Krugman, P. R., & Wells, R. (2013). Macroeconomics. New York: Worth Publishers.

Mankiw, G. N. (2013). Macroeconomics. New York: Worth.