American economy over the last two years (2009-2010) Essay

American economy over the last two years (2009-2010) - Essay Example The loss of investors’ morale to invest and become active in the capital and financial markets has had a great negative impact to on the overall American economy. The economic crisis can be closely attributed to the decline in collective economic power of consumers, businesses, and investors. In the fiscal year of 2009 and 2010, several Americans lost their jobs, a phenomenon that negatively impacted on consumer and household spending, although Obama’s job creation plan had reduced the rate of joblessness significantly through investment in new infrastructure. The government’s investment in infrastructure has however created a negative impact on the countries budget, as there is a possibility of the government incurring a budget deficit in the next years to recover the huge amount spent on infrastructure. The economy has taken a long time to recover due to reduced consumer and business spending and more particularly loss of investor confidence in the financial ma rkets. However, real estates and undervalued stock during that period could offer the best investment opportunity as many investors have shifted focus from investing these industries. On the other hand, decrease in consumer spending as result of bankruptcies of consumers may exert economic strain on discretionary spending sectors and retailers. This calls for socio economic approach to solve the vicious circle of economic decline of the American economy. The government introduced economic policies alongside Obama’s fiscal stimulus package to stop the economic decline and restore its stability and development. However, the economic disruptions of 2009 and 2010 had varying effects on different sectors of the economy with the recession affecting specific industries. The financial, real estate and tourism industries were adversely affected while technological, export and alternative energy industries were not affected. Aggregate Demand Aggregate demand is the measure of collectiv e spending on goods and services in a particular country. Outputs, employment levels, and general prices of goods and services are affected by variations in the county’s aggregate demand. Aggregate demand consists collectively of consumers’ expenditure, capital investment, government spending, exports and imports of goods and services. Expenditure on consumer goods and services include durable and non-durable goods consumed and repurchased by the specific consumers. In aggregate demand, expenditure on consumer goods and services is the biggest component. Capital Investment comprises of the total spending on capital goods that are used and applied for production of more goods and services such as plant, equipment and buildings, which will allow us to produce more consumer goods in the future. Capital investment also comprises of expenditure on working capital, which includes both work in progress and stocks of finished goods. Capital investments have bigger percentage b eing spent by the private sector and a smaller percentage being spent by the government in undertaking such as construction of new schools and road networks. Capital investments, particularly in the private sector of the American economy declined in the fiscal year of 2009 and 2010 due to the world recession that had affected