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Ap macroeconomics Internal assessment

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Commentary:

 

One of the world’s most important jobs has put the U.S. in great danger by increasing national debt, causing unemployment to be at its lowest, and increasing interest rates. Despite the tax cuts, Trump has increased his import and export tariff expenses causing multiple debt situations. According to this article, this debt is caused by poor decision making from the president and  minor setbacks that cause major debt.

 

Analysis:

 

Under President Donald Trump’s administration, the United States government debt has grown faster than any other former president’s administration. Since 2012, the national debt has grown over $5 trillion, from $16.7 trillion in 2013 to $21.9 trillion in 2018!  By the end of Trump’s term it is expected the debt will increase by another $4.4 trillion. The national debt has grown by 6.6 percent since Trump took office in 2017. Much of this was accrued during Trump’s first year in office. Despite unemployment rates being at their lowest and a booming economy, this is the fastest growing rate of the national debt in our country’s lifetime. The irony is one of his platform points was he would reduce the national debt. His defense is we haven’t yet felt the impact of the corporate tax cut, which was supposed to open opportunities for corporations to invest money in the US and boost our economy.  The government sets the value of the dollar and the base interest rate. When the national debt increases, the interest rates increase, and the higher the interest rate, the more consumer debt is incurred.  This is good for the government because when they have higher interest rates on the consumers, the more other countries invest in our country.  Other countries want to invest at this point because they get a higher return on investment. For example, if the interest rate increases, the demand for homes decreases since the monthly payments will be higher so the price of homes would go down [Graph 1]. As a result, the supply for furniture would decrease and the price of furniture would increase because there will be low demands for homes [Graph 2].This exemplifies of how national debt can cause problems so small that can affect the economy.

 

Graphs

 

Graph 1

 

When the Demand for houses decreases, prices will also decrease for houses

 

Graph 2

 

When the supply for furniture will decrease but the price for furniture will increase







 

Unemployment Rates- The percentage of unemployed workers in the total labor force.

 

Interest Rates- The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

 

Investment- purchase of goods that are not consumed today but are used in the future to create wealth.

 

Evaluation

 

In the long run, the interest rates are increasing so people spend less amounts of money on products and, the supply along with unemployment, increases at a impactful rate which causes a recession. The national debt will increase because with higher interest rates job wages will increase.

 

In the short run, since the interest rates are going up many people will decide to use substitute goods, and stop buying stock and complementary goods. The national debt will still be active because the small issues like the wall building for example only causing an increase in more debt on subsidies or government spendings.  


https://www.bloomberg.com/news/articles/2018-12-12/u-s-debt-under-trump-has-swelled-by-size-of-brazil-s-economy

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