In the first weeks of this course we learned about business cycles. There are four phases to a business cycle- a peak, recession, trough, and expansion. A peak is when business activity reaches a temporary maximum with full employment and near-capacity output. A recession is a decline in total output, income, employment lasting six months or more. A trough is the bottom of the recession period, with output and employment at their lowest. Following a recession is a recovery and expansion. This is when output and employment are rising and the economy is reaching toward full employment. Brue, Flynn, & McConnell, 2009, pp. 521-523). Currently, I feel that our economy is in the recovery phase of the cycle. We have hit the lowest points of unemployment and in total output and income; and on our way to improving this. When asked the question, “Do you think that we are still in a recession? ” I stopped to reflect on the discussions throughout this course, and the state of the economy as I see it. I do not believe that we are completely out of the recession as of yet, but on the way to recovery.
It seems that Obama’s $800 billion stimulus package should benefit many people- wage employees and self employed, first time home buyers, home owners looking to improve their homes through energy efficiency, students, vehicle buyers, unemployed, and middle classes alike. The stimulus package has given tax breaks to the middle and lower classes, the unemployed do not have to claim the first $2,400 in their income, and students’ loans are being forgiven and The American Opportunity Credit has increased from $1,800 to $2,500. Converge Staff, February 26, 2009). These are just a few things that the stimulus package has offered. Home buyers were also given a large tax credit as were vehicle buyers. All of these plans increased spending which helps the economy. However, the package has not done much to solve the foreclosure rates or the negative equity problems. The Unemployment rate has risen. In fact, “a total of 43 states reported rising jobless rates in December, reversing signs of improvement seen the month before,” (Pepitone, January 22, 2010).
There are automatic stabilizers built-in to help the economy recover from a recession, and after all is said and done, no one will know whether the stimulus package worked or not. If there is no way to know if the package will help or not; then the only thing that is certain is that it can most certainly put us further in debt. Ben Bernanke testified about the state of the U. S. economy and the economic outlook on June 9th 2010. In his comments he said that he anticipated the economic recovery to remain on the right track in spite of the current debt predicament in Europe.
Furthermore, he warned that economic growth was not likely to be rapid enough to create the numerous new jobs required to make a considerable impression in the high unemployment rate anytime soon. (Board, 2010). Currently, I feel that all of the stimulus money could have been used in a more productive way. I do not pretend to believe that there is any one solution to this recession, or that it will be easy to fix the short-term domestic economy. However, I do believe that we- as a country, should focus more on small businesses. Small businesses are an integral part of this economy.
Small businesses make up half of U. S. gross domestic product (GDP). They also create 60 to 80 percent of all new jobs. (Longley, 2010). “Figures from the SBA show that small businesses with fewer than 20 employees increased employment by 853,074 during 2001-2002. ” (Longley, 2010). I believe that by promoting small businesses the economy will see a shift in the unemployment rate, in a positive direction; aiding in our current economic state. As Dr. Chad Moutray, Chief Economist for the Office of Advocacy said, “Small business drives the American economy.
Main Street provides the jobs and spurs our economic growth. American entrepreneurs are creative and productive, and these numbers prove it. ” (Longley, 2010). The United States is in the process of recovering from this recession, but it is a slow process. I think that promoting small businesses will aid this recovery. References: Brue, S. , Flynn, S. , & McConnell, C, (2009). Economics. Boston: McGraw Hill. Converge Staff, (February 26, 2009). Stimulus Package Offers College Students $50 Billion in Benefits.
Retrieved on May 20, 2010 from http://www. convergemag. com/workforce/Stimulus-College-Students-50-Billion. html Board of Governors of the Federal Reserve System, (June 9, 2010). Chairman Ben S. Bernanke: Economic and financial conditions and the federal budget. Retrieved on June 23, 2010 from http://www. federalreserve. gov/newsevents/testimony/bernanke20100609a. htm Longley, Robert, (2010). Small Business Drives U. S. Economy: Provides jobs for over half of nation’s private workforce. Retrieved on June 23, 2010 from