Uop Eco 212

To: All University of Phoenix Students and Staff

From:

RE: Measuring Economic Health Memo

The business cycle is measured by the Gross Domestic Policy (GDP). “GDP is a monetary measure of the economy’s production, valued using the prices from a selected year (Rummery, 2002).” A business cycle has four parts and each part does not have a specific length of time. The parts are expansion, peak, recession and a trough. Each part can last from a few weeks, months or years and these parts that make up the business cycle. Comparing the GDP from a specific year to other years shows the growth or decline in the GDP. The boom and bust cycle of the economy shown by measuring GDP determines the business cycle and how long each cycle lasted.

Multiple government entities determine national fiscal policies. The Federal Reserve (Fed) acts as a central bank and regulates the amount of money in the economy. When the Fed wants to stimulate the economy it will buy government bonds via the Federal Open Market Committee and put the money from the bond purchase into the banking system. The Fed also sets the Discount Rate to raise or lower interest rates. The Internal Revenue Service (IRS) determines fiscal policy with the tax rates it collects. A change in taxes changes the money supply. An increase in taxes lowers the amount of money people have to spend. Lowering the tax rates increased the amount of money people have to spend and this stimulates the economy. The Office of Management and Budget OMB) oversees the financial management and fiscal policies. The OMB helps prepare the federal budget. This budget sets the spending of the U.S. Government adding or subtracting from the national debt. Contracts awarded to companies will stimulate that local economy and the overall spending can raise or lower taxes.

Changes in the fiscal policies impact the economy in positive or negative ways. Currently the U.S. economy is in need of a boost. One way of boosting the...