Brief economic analysis Essay Example | Topics and Well Written Essays - 750 words - 1

Brief economic analysis - Essay Example This action also shows the government and the whole nation at large have confidence with the growth of the economy. The economy is expected to grow to convincing levels (Moore 5). The Federal acquires bonds from financial institutions like banks and investors. These bonds include mortgage securities and treasury bonds. The main purpose and goal of doing this was to reduce the pressures exerted on long-term interest rates. Make investors gain confidence in borrowing funds because they have a longer payment period. This action by the Federal Reserve also was meant to promote a stronger recovery strategy. This action by the Federal Reserve has affected people who had the motive of saving with financial institutions because the Federal Reserve has reduced the interest rates making them go to low levels (Moore 10). Some economists argue that it will have no difference in saving the money saved in the banks and keeping it in the house since it earns low returns when saved in the banks. Usually, as the interests rates reduce, people tend to save less. Investment on the hand improves although not proportionally. The other action of the Federal Reserve of buying bonds reduced the returns on bonds. Reduction of returns on bonds made investors not buy more bonds. Investors’ buy bonds with the aim of making profits from the returns they acquire, but having in mind the returns are low; they will shift their investment policies in other things. Investors shifted to buying other assets and bonds from foreign countries. Buying bonds in foreign countries will ensure that they continue makin g gains rather than having the money stay in bank accounts where they earn little returns. Another current issue in the American economic condition is the inequality challenge. There exists a big difference between the people who own corporations and the employees. The main cause of this inequality is that corporations are interested