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Acting as the Economic Advisor to the President Essay

The US economy is currently in recession. This recession has been brought about by the fall of the US stock exchange thanks to the mortgage crisis. The greater part of the 1990s and early 21st century, the US economy experienced positive growth. With an average growth of….. %, in the 1990s compared with the current growth of ……%, the US economy is definitely experiencing a slowdown(Cutler, D. Poterba, J. & Summers, L. 2001) The US economy experienced a recession similar to the present in 1987. This recession was caused by the fall of NASDAQ stock exchange and was consequently known as the NASDAQ crush.

From this period, the US economy experienced growth of an average of …. % until the 2000-2002 global stock market crash which accounted for a slowdown in economic growth. This slowdown was however short-lived and the economy was back on its growth path. This growth was similarly short-lived as the current credit crunch started been witnessed by the US financial market. The recession might not go away soon, more casualties are expected but the United States has not yet reached the depression stage(Roberts, P.

C. 2007) 2. The United States has run a trade deficit over the past two decades. Has this deficit been good or bad for the economy? Be sure to discuss several different aspects of this issue. The trade deficit in the United States of America has been experienced since 1976! For the last 40yrs. Trade has grown to be a big part of the United States’ economy. The rise in influence of trade in the economy has grown from as low as 3% of GDP in 1960 to over 25% in 2007, (Paul. C. 2007).

The trade deficit has recently become a major concern to the treasury of the United States due to the dire world economic recession. The recession has reduced individual’s purchasing power around the world therefore reducing demand for America’s relatively expensive products compared to other products from the Asian markets which are significantly cheaper. The above facts are irrespective of the fact that America is the world’s biggest producer providing 21% of the world’s products, 70% more than china which is the main competitor.

The trade deficit experienced by America is good and at the same time bad for America. The trade deficit is good in the sense that it challenges Americans to produce better products in terms of quality and efficiency to rival the Asian competition. Another effect of the increasing trade deficit is the push for a weaker dollar by the monetary regulators. This move will in effect raise the affordability and demand for American products. Therefore the deficit will cause a reduction in prices of commodities and at the same time an improvement in the quality of goods produced.

The trade is bad in the sense that it leaves America in debt thereby stagnating the growth that would come as a result of investment(Roberts, P. C. 2007). 3. Corporate Social Responsibility is a growing issue for US and multinational companies. How does this fit in with the business motivation of maximizing profit? Isn’t there a contradiction? Corporate social responsibility (CSR) today forms a very significant part of the functions and operation of a company. Through social responsibility, companies are able to give back to the community in which they operate.

Unlike the past, social responsibility today is viewed as an obligation rather than a charitable act. Companies have taken it upon themselves to build and develop the communities that have enabled them to earn profits. The rationale behind this paradigm shift has been that it is from the community that the company makes profits and grows(Presentation of Financial Statements” . 2007) . Corporate social responsibility fits perfectly with the profit motive of companies. It is through corporate social responsibility that companies are able to develop the communities that they operate in.

if for example a company is producing a product that pollutes the environment if the disposal management is not efficient, then the company will exercise corporate social responsibility by cleaning up the community(Alternative Stock Library. 2008). This action from the company will increase its profits because the community represents will refrain from suing it for damages caused to the community and the community members who are consumers of the company’s products will continue in the consumption. 4. Industry A is made up of only four firms. Each firm has a 25% market share. Industry B is made up of 10 firms.

One firm has a 70% market share and the other nine firms evenly share the rest of the market. In which industry is monopoly power or market concentration likely to be greater? Please explain Monopoly power and market concentration is more likely in industry B. the company that enjoys 70% of the market share can easily buy out the other nine competitors thereby increasing its market share and domination in the market. In industry A, the four companies will have to work together or independently. It is highly likely that they will work independently in the interest of profit making, therefore ruling out any possibility of competition.


Alternative Stock Library. (2008). “Japan Might Be Extremely Profitable Investment”. London: Alternative Stock Library Cutler, D. Poterba, J. & Summers, L. (2001). “Speculative dynamics”. Review of Economic Studies. London:SAGE Hagstrom, Robert. G. (2001). The Essential Buffett: Timeless Principles for the New Economy. New York: John Wiley & Sons. Presentation of Financial Statements” Standard IAS 1, (2007) International Accounting Standards Board. New York:Macmillan Roberts, Paul. Craig. (2007). Jobless in the USA . London:Newsmax.

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