Ben Assignment

ASIA PACIFIC INSTITUTE OF INFORMATION TECHNOLOGY

APIIT Diploma Part I

Individual Assignment

Business Environment

Prepared By

Sahan Munasinghe (CB 003824)

Module Code & TitleABUS001-3-1-BEN

CohortFF1021

Date of Submission24th March 2010

InstructorShurmara Fernando

Word Count4,620

1

http://apiit.edu.my/

APIIT Sri Lanka, Business environmentCB003824

Business Environment Individual Marks

Student’s ParticularsIntake:

Word Count:

Student Particulars:Name Student ID TM (%)

Lecturer’s Use only

Individual (25%)Marks

Allocated (%)

MarksObtained

(%)

Total / Grading(%)

1 Content 60%Analysis of Economic Factor (5 – 8 factors) 15

Analysis of Social Factor (5 – 8 factors) 15

Critical Evaluation of Opportunities 15

Critical Evaluation of Threats 15

2 Language 15%

3 Referencing 15%

4 Overall Effectiveness 10%

Additional Comments

http://apiit.edu.my/


Student’s ParticularsStudent’s Particulars..............................................................................................................................................................................................................22

11 AcknowledgementAcknowledgement....................................................................................................................................................................................................44

22 IntroductionIntroduction........................................................................................................................................................................................................................55

2.12.1 Introduction about USAIntroduction about USA............................................................................................................................................................................55

2.22.2 The Economy of United States of AmericaThe Economy of United States of America..................................................................................................................66

33 The U.S Economic DownturnThe U.S Economic Downturn................................................................................................................................................................77

44 Factors that effected U.S Economic DownturnFactors that effected U.S Economic Downturn............................................................................................................88

4.14.1 Economic FactorsEconomic Factors..............................................................................................................................................................................................99

4.1.14.1.1 Interest RateInterest Rate............................................................................................................................................................................................994.1.24.1.2 Unemployment RateUnemployment Rate..............................................................................................................................................................10104.1.34.1.3 Economic Growth RateEconomic Growth Rate....................................................................................................................................................11114.1.44.1.4 Business Cycle StageBusiness Cycle Stage..........................................................................................................................................................13134.1.54.1.5 Exchange RateExchange Rate................................................................................................................................................................................14144.1.64.1.6 Inflation RateInflation Rate....................................................................................................................................................................................1616

4.24.2 Social FactorsSocial Factors......................................................................................................................................................................................................1717

4.2.14.2.1 DemographicDemographic....................................................................................................................................................................................17174.2.24.2.2 EducationEducation................................................................................................................................................................................................20204.2.34.2.3 Health AttitudesHealth Attitudes............................................................................................................................................................................22224.2.44.2.4 Work PatternWork Pattern....................................................................................................................................................................................23234.2.54.2.5 Spending HabitsSpending Habits..........................................................................................................................................................................24244.2.64.2.6 Class StructureClass Structure................................................................................................................................................................................2525

55 Opportunity / Threat TableOpportunity / Threat Table......................................................................................................................................................................2626

SocialSocial........................................................................................................................................................................................................................................................2626

FactorsFactors..................................................................................................................................................................................................................................................2626

66 Discussion of OpportunitiesDiscussion of Opportunities..................................................................................................................................................................2727

6.16.1 Economic FactorsEconomic Factors..........................................................................................................................................................................................2727


77 Discussion of ThreatsDiscussion of Threats......................................................................................................................................................................................3030

7.17.1 Economic FactorsEconomic Factors..........................................................................................................................................................................................3030


88 ConclusionConclusion........................................................................................................................................................................................................................3232

99 ReferencingReferencing....................................................................................................................................................................................................................3333

1010 BIBLIOGRAPHYBIBLIOGRAPHY................................................................................................................................................................................................3636


1 Acknowledgement

Author owes a great many thanks to a great many people who helped and

supported me during the writing of this project.

Author’s deepest thanks to Lecturer, Miss Shumara Fernando our Business

Environment lecturer the Guide of the project for guiding and correcting various

documents of mine with attention and care. She has taken pain to go through the

project and make necessary correction as and when needed.

Last but not the least; Author would like to thank author’s parents who helped

a lot in gathering different information and specially for their financial support.

Despite of their busy schedules, they gave different ideas in making this project

unique.


2 Introduction

This report discusses the U.S.A Economic downturn that affected many nations

including developed as well as developing countries. This report will be focusing on

main factors that affect in U.S.A Economy.

2.1 Introduction about USA

The United States of America located bordering

both the North Atlantic Ocean and the North

Pacific Ocean, between Canada and Mexico.

According to CIA World Factbook (2010) the

estimate US population is around 307,212,123

and USA geographic area is 9,826,675 sq km

including land area of 9,161,966 sq km.

Many different peoples around the world form

the United States of America. Millions of

people from many different countries have

immigrated to the United States and made

the country as their new home.

According to CIA World Factbook (2010) The Dollar ($) became the most acceptable

international payment for goods and services and it became an exchange currency to

do businesses around the world because of U.S.A is the world's largest trading nation.

Source: international-job-search, (2010)

Figure 1:


2.2 The Economy of United States of America

In mixed economy of the USA, corporations and other

private firms make the vast majority of microeconomic

decisions, and governments prefer to take a minimal role in

the domestic economy. Because of this, the U.S. has a small

social safety net, and business firms in the U.S. face

considerably less regulation than those in many other nations.

The first ingredient of a nation's economic system is its natural resources. The United

States is rich in mineral resources and fertile farm soil, and it is fortunate to have a

moderate climate. It also has extensive coastlines on both the Atlantic and Pacific

Oceans, as well as on the Gulf of Mexico. Rivers flow from far within the continent

and the Great Lakes - five large, inland lakes along the U.S. border with Canada -

provide additional shipping access. These extensive waterways have helped shape the

country's economic growth over the years and helped bind America's 50 individual

states together in a single economic unit. (According to CIA World Factbook ,2010)

The United States of America has the world’s largest economy. According to the CIA

World Factbook, (2009) GDP is believed to be

$14.26 trillion.

Source: releasemoney, (2010)

Source: iranianmy corporate website, (2010)

Figure 2

Figure 3


3 The U.S Economic Downturn

Real estate plays an important role in the U.S. economy.

In 2007 the American economy began to slow significantly

because of a real estate slump and related credit markets

financial problems. December 2007 the U.S economy entered a

recession stage. This recession continued into early 2009. This

affected around the world, stock markets have fallen, large

financial institutions have collapsed or been bought out, and

governments in even the wealthiest nations have had to come up

with rescue packages to bail out their financial systems.

The subprime mortgage crisis started because banks and mortgage companies

packaged risky loans and resold them on the secondary market which was created by

the legislation that created Fannie Mae and Freddie Mac. They became the

responsible mortgage firms to U.S Economic Downturn.

For the better understand Figure5 refers U.S economic growth rate by Gross Domestic

Product details by 2006 to 2009 quarter to quarter.

Source: thinkbigmagazine corporate website, (2010)

Source: BEA, Growth in GDP (2010)

Figure 4

Figure 5


According to BEA Graph (2010) real gross domestic product the output of goods and

services produced by labour and property located in the United States -- decreased up

to – 6.2 percent in the first quarter of 2009. This decrease started from the first quarter

of 2008. As discuss earlier this U.S economy downturn started December 2007 this

stage clearly shown in the above graph.

4 Factors that effected U.S Economic Downturn

Source: Author’s Work

Figure 6


4.1 Economic Factors

4.1.1 Interest Rate

‘This Interest Rate represents the price that borrowers have to pay to a lender

for the privilege of using their money for a specified period of time’ (Palmet and

Hartley, 2009: 437)

When refers to U.S economy interest rates increase, banks slowly lend less

and businesses slowly put off spreading out. This happens to consumers too slowly

realize they aren't as wealthy as they once were and put out of purchases. So people

don’t have money to save they spend their money to recover their mortgage. This

means home mortgage loan payments will be greater when the rates are high. The

reaction of this is home value will not rise further.


Figure 7


The opportunity in high interest is control price increases. This means the price of

other goods like food and gasoline will stay low, and the paychecks will go further. If

people were smart enough to follow a fixed interest loan at a low rate your income

will become even more. At the most basic level the goal of all businesses is to make

profit.

A business makes must be thoroughly analyzed for its ultimate forecast at bringing in

profit and how those forecast compare to other possible sources of returns. Since

saving capital at current interest rates is a possible source of profits higher interest

rates tend to make new ventures less attractive.

4.1.2 Unemployment Rate

According to Beardshaw et al., (1999: 566) ‘Thus when we speak of

unemployment we are speaking of those who are in some form of paid work and when

we say the unemployed we are speaking of those who are actively seeking jobs.’

When focusing about the of 2007 to 2009 period of U.S economy downturn

unemployment will continue to rise even after the economy has started to recover.

Employers are keen to lay people off when the economy turns bad. For large

companies it can take months to put together a clear plan. Companies are even more

doubtful to hire new workers when the economy improves.Figure 8


Above Chart shows Unemployment peaked at 7.2% in 2009. It rose steadily

from its low of 4.8 % in March 2007. It did not really become a concern until a year

later when it broke above 5% in March 2008. By then, the economy had contracted

over 7%.

The main affect from this is unemployment rate will tell, if more people are

looking for work, less people will be buying, and the retail sector will decline. If this

rate reaches 6 or 7% government occupy and create new jobs through rousing the

economy. This may help to unemployed.

4.1.3 Economic Growth Rate

‘The sum of all goods and services produced in a country during a year’ (Hirt, 1996:

15)

Economic growth rate measure by Gross Domestic Product (GDP). This calculates by

the changes in rate in GDP by time to time. Economic growth can be either positive or

negative. Positive growth can refer as inflation and the negative growth can refer as

recession or a downturn. According to economywatch corporate website, (2010) a

growth rate of 2-3 percent is considered ideal for any economy.

Before the mortgage and financial crisis in U.S GDP annual rate was between 2-3% in

2003 to 2007. To get idea Figure9 analyse about this.

Source: indexmundi, U.S GDP rate (2009)

Figure 9


The annual growth rate for 2006 looks great but after that the effect of the housing

boom had hit its peak. In 2007 economy look steady. In late 2007 mortgage crisis

began to start so people’s productivity reduced dramatically from late 2007 to 2009.


4.1.4 Business Cycle Stage

According to Palmet and Hartley, (2009: 432) ‘The situation where injections exactly

equate with withdrawals can be described as a case, with the normal state of affairs

being for one of these to excess of injections’.

The five stages of the business cycle are growth (expansion), peak, recession

(contraction), trough and recovery. At one time, business cycles were thought to be

extremely regular, with predictable durations. But today business cycles are widely

known to be irregular varying in frequency magnitude and duration.

When refer to U.S economy there are times when the economy is brisk and

everyone feels confident about his or her prospects for the future. As a result people

spend money to buy houses. When a recession during such a time, fewer people are

buying homes. Even so, some homeowners find themselves in a situation where they

must sell. Some may even find themselves unable to make their mortgage payment

perhaps because of a layoff in the family.

Source: thebluecollarinvestor, Business Cycle, (2007)

Figure 10

Source: indexmundi, US Dollar Exchange Rate (2009)


4.1.5 Exchange Rate

‘The exchange rate is the price of one currency in terms of another currency’ (Palmet

and Hartley, 2009: 438)

Figure 11


U.S exchange rate is determined by the foreign exchange market, known as forex. For

this reason, exchange rates vary daily, depending on what traders think the currency is

worth.

According to Federal Reserve Foreign Exchange Rates (2010) during the credit crisis

the dollar strengthened 22% as businesses hoarded dollars since credit wasn't

available. Before that (2002 - 2007), the dollar lost 40% of its value while the debt

increased by 60%.

In the current economy the dollar is relatively strong compared to other currencies.

This makes imports cheap, which reduces inflation. This allows to buy a house or

easily can pay the mortgage. And foreign investors invest their money in reality

businesses.

When the dollar declines, it makes U.S. produced goods cheaper and more

competitive when compared to foreign produced goods. This could help increase U.S.

exports, boosting economic growth.

A strong dollar also means that U.S. companies can export less since their products

cost more relative to foreign products. This also effect companies to source jobs

overseas because of the hight cost of labour.


4.1.6 Inflation Rate

According to Palmet and Hartley, (2009: 436) ‘Inflation refers to the rate at which

prices of goods and services in an economy are ricing’.

Inflation can affect different parts of the economy at different times. When refer to

realty businesses mainly housing prices increase. This was happen in 2006 when

according to above chart it shows that Inflation rate is high because of assets inflation

has been affected mainly in 2006. So consumers full fill their main basic needs

because of the prices of most goods and services are high. And people can’t pay their

mortgage due to inflation in a Economy.

Source: indexmundi, Inflation rate (2009)

Figure 12


4.2 Social Factors

4.2.1 Demographic

‘Demographic is the study of population in term of their size and characteris. Among

the topics of interest to demong to demographic are the age structure of a country, the

geyraphic distribution of its population, the balance between males and females, and

the likely future size size of the population and its characterstics’. (Palmet and

Hartley, 2009: 438)

Source: Author’s WorkFigure 13


Above Chart shows how tremendous the population growth in U.S.A from 2003 to

2009. When referring the above chart to retail businesses. The sectors will face in the

next decade and beyond is the continued renewal of existing urban areas and the

creation of new ones where expanding populations will cluster. Undeveloped land and

managing growth through increasing suburban spread out is not a viable option. We

cannot afford the necessary infrastructure and environmental costs.

As the country's ethnic population rapidly expands, ethnic or cultural demands will

impact the retail experience. Retailers will have to learn to address their concerns,

fears and misconceptions about minorities, the inner city and other urban markets.

The need for growth will necessitate this change.

In addition to filling the traditional retail role of providing basic goods and services,

mixed-use developments must also provide places for people to interact, entertain and

be entertained. The trend toward building and opening more restaurants, community

facilities and movie theaters in or near these developments will expand. Because of all

of these offerings, the average length of shoppers' stays at these complexes will

increase and they will spend more money. How much they interact with each other the

economy depends on that.

Source: indexmundi, Population (2009)

Figure 14



According to CIA (2009) United States Age structure is categorized as below

This gives proper information about population according to age. In U.S more

population is belongs to age 15 to 64 years. This is good opportunity to realty firms

because more people were employed during this age limit so people expand their

land needs but when it become high more land needed so environment issues will

affect the reality firms.

4.2.2 Education

Education in the United States is mainly provided by the public sector.

According to CIA (2009) net enrolment ratio in primary education is nearly 96.5%.

Source: ednetpower, Education System in United State (2009)


Above chart show the entire education system in U.S. U.S.A has placed greater

weight on developing an education system that can produce workers able to function

in new industries such as in technology and science fields. This is partly because older

industries in developed economies like U.S were becoming less competitive, and thus

were less likely to be able to continue dominating the industrial landscape.

Figure 16


U.S economy becomes more productive as the proportion of educated workers

increases, since educated workers are able to more efficiently carry out tasks that

require literacy and critical thinking. Better-educated workers tend to be more

productive than less educated ones; however, obtaining a higher level of education

also carries a cost.

Owners of all types of real properties, especially owners and occupants of big

city downtown properties have a high investment in the educational quality of the

local labor force and should encourage improvement even if it results in increased

property taxes. The long-term prosperity, and market value, of every property depends

on the long-run economic viability of the general area in which it is located. A key

ingredient in the area's long-run viability is the quality of the labor force available to

firms located there. If the quality of the area's labor force is low, the area's overall

ability to attract new firms and retain existing ones will deteriorate. The change will

weaken the demand for whatever real property is located there. Moreover, the

importance of the quality of the labor force as a locational factor is increasing because

of rising demand for high technology worker skills. The deterioration of educational

quality is especially debilitating in large cities. Property owners should take an active

role in ensuring that local schools use resources effectively to improve educational

performance.

4.2.3 Health Attitudes

Health care in the United States is provided by many separate legal entities. Health

care facilities are largely owned and operated by the private sector. According to the

Office of Actuary Centers for Medicare and Medicaid Services (2009) the U.S. spent

$2.26 trillion in 2007.


Figure 17

Above chart shows Life

expectancy at birth from 2003 to

2009. This shows a stability of life

expectancy because of from past

to present U.S focus on health and

spent lot of money to improve and

to keep it as unchanged every

year. United States spends much

more on health care than any other

countries (World Health

Organization, 2009).

According to aspe.hhs (2009) since the late 1990’s health care spending has increased

at a faster rate of growth than has gross domestic product (GDP), inflation, and

population.

Increased health care spending improving access to new health care technologies and

treatments.

Source: indexmundi, Life expectancy at birth (2009)

Figure 18 Source: Visualeconomics, (2010)


The economy is much more stabilized from the costs of health care. People in the

work force can get health care any time they require it. There is no concern about

insurance coverage or added expenses for the house hold. People can get better and

get back to work quicker without financial concerns holding up the healing process.

This in turn feeds the economy, more people working, more people spending money,

more people paying income tax and thus keeping the money flowing. So when people

healthy they life become luxurious, so people spend their money for a luxurious life.

They buy new houses so the mortgage companies having a opportunity to serve there

costumers.

4.2.4 Work Pattern

The U.S economy is characterised by a relatively high level of flexibility in work

patterns when compared with other countries. The work force is almost split between

male and female employment, although women are more concentrated in part-time

rather than full-time employment. The numbers of males working part time is

increasing each year. Specially student who migrate to U.S they do part time jobs.

At present in U.S there is growth of numbers of employees working part-time and on

temporary contracts jobs. Many large companies have left their core workforces from

jobs in order to cut costs and to become more competitive.

According to wfnetwork (2009) In U.S the new concept called (family friendly

employment practices) has encouraged the increasing feminisation of the workplace

e.g. job sharing, home working, and the development of creche facilities in the

workplace. While some employers emphasise the importance of developing a good

work and life balance others demand extremely long hours from full-time employees.

From the work pattern get tight people need easy way full fill their daily work and

save their time so people live eligible to live where they work so people buy their

hoses near to the work places so mortgage firms should forces to full fill their needs


as well as their family essential needs like schools, railway stations, and super markets

malls.

4.2.5 Spending Habits

Spending Habits are totally influenced by changes in major economic

variables such as income, cost of livelihood, interest rates and saving and borrowing

patterns.

According to BLC (2009) The average U.S.A consumer spends $49,638 a year on a

range of necessary and desired expenditures. These expenditures come out of an

annual household income of $63,091 per year on average, before taxes.

Source: Visualeconomics, (2010)Figure 19


According to above chart the largest expenditure of the average household is housing.

This takes up an average 34.1 percent of the yearly budget of households. This is an

average of $16,920 spent on housing. This shows people give main habbit to spend

their money to pay their mortgage.

4.2.6 Class Structure

Today In America even in other countries class define wealth. The main three classes

are Rich, Middle class and Poor. People who graduate from universities tend to get

better jobs and make more money. Richer people afford better health care and tend to

live longer and healthier lives. Service jobs like McDonald’s countries with lower

wages are a larger percentage of new jobs and they pay much less than the jobs that

are going away. Many International Student who live in U.S work for lower wages

becuse they need money to pay their rent. Realty businesses providing lower cost

apartments and houses for student and economic classes. The more people in U.S

belong to middle class so reality firms considering their needs and providing them

beget full mortgage that suet to them.


5 Opportunity / Threat Table

External

Factors

Sub Factors Impact to the

organization

Importance

(1-5)

Economic

Factors

Interest RateThreat 1

Opportunity 3

Unemployment RateThreat 1

Opportunity 4

Economic Growth Rate Threat 3

Opportunity 1

Business Cycle StageThreat 1

Opportunity 1

Exchange RateThreat 2

Opportunity 1

Inflation RateThreat 1

Opportunity 3

Social

Factors

DemographicThreat 2

Opportunity 1

EducationThreat 5

Opportunity 1

Health AttitudesThreat 3

Opportunity 1

Work PatternThreat 4

Opportunity 1

Spending HabitsThreat 1

Opportunity 2

Class StructureThreat 3

Opportunity 2


6 Discussion of Opportunities


6.1.1 Interest Rate

When interest rate increase demand for goods and services as people have

more money to spend and the discretionary income increases.

In high interest people will spend their money on luxuries needs.

As inflation rates drop the discretionary income would increase there by this

would enable realty businesses in US to earn more profits.

6.1.2 Unemployment

If there is higher unemployment companies can recruit unemoply people for

small vages.

The overall productivity become high and cost of production will become less

because of that the companies can sell their product profitable price.

Unemployment decreases so the GDP increases and companies output become

high.


When the Economy Growth Rate is high the realty businesses boost their sales

and also their business.

Business moderation translates into an increase in output.

Businesses increased their investment so the economy will expand.



Businesses can use Technological innovations to moderate a healthy business

Cycle.

Expansion and contraction in the level of inventories of goods kept by

businesses.

Investment decisions can be taken based on the Business Cycle.

6.1.5 Exchange Rate

Help businesses to expand globally.

Companies can source jobs overseas.

The dollar is relatively strong foreign investors invest their money in

businesses.


Investors invest their money in better stocks so they can gain more profit from

that because of stock demand is low.

Short term deposits and funds will give the required liquidity to company that

need while ensuring not lose out in case interest rates were to rise.

More people will buy houses because the property values will rice.

6.2 Social Factors

6.2.1 Demographic

When more people enrol to the economy, the businesses will expand locally as

well as globally.

Companies can full fill different ethnic population so they businesses can

expand their products to different cultural needs.

By placing Interact places like shopping malls, restaurants, movie theatres

people will spend more money on them.

6.2.2 Education

When its higher education means more skilled so they give a proper out come

to the economy.


Educated employees have the ability to understand the customer needs so they

innovate goods and services according to customer needs.

Educated employees can enrich their creativity knowledge to goods and

services.


More energized persons will contributing to the economy the overall

productivity will boos up.

A healthy lifestyle will shows employees can contribute well in the

organization.

6.2.4 Work Pattern

The people’s productivity will be become high when the employees are fresh

minded.

Unemploye people can contribute to the economy by working part-time and on

temporary contracts jobs.

For some productivity process there is time schedule so the quality and the

quantity will increase.


Investors can invest in mortgage companies because Americans spend most of

the money on mortgages.

Foreign companies can attract customers by full fill their wants.


By indentifying each and every Class Structure companies can produce

product that suite for every society level.

Service jobs produce larger percentage of new jobs and they pay much less

than the jobs that are going away.


7 Discussion of Threats


7.1.1 Interest Rate

People spend their money for the essential needs when interest rates increase mortgage loan payments will be greater when the rates are high.

When the interest rate is high customers saves more, companies unable to sell their product.

The home value will not rise further due to high interest.

7.1.2 Unemployment Rate

When Unemployment rate is high people don’t have much money in that case companies products want sell in the market as expected.

When the unemployment rates are high, companies are not produce to their maximum limit so it’s not contributing maximally to the economy.


When interact with the other world U.S companies unable to compete with the international market.

When the GDP drops companies will bankrupt because of the less sales.


Businesses can change at any time because it’s not predictable. This happens because of the External Environment changes.

Investors have to take risk before they investing. Profit will change time to time.

7.1.5 Exchange Rate

U.S dollar change in value against each other all the time. This is because most currencies are based on flexible exchange rates so businesses have to adobe to those changes.

Exchange rates changes can increase or lower the price of a product sold overseas.

The price of imported raw materials may change.


Businesses may face pressure from employees organisations for pay awards to keep up with inflation and this can affect costs of production.

This affects spending power if wages do not rise by the same rate as inflation. Savings can fall in value if the rate of interest is lower than inflation.


7.2 Social Factors

7.2.1 Demographic

The population would pose huge implications for hospitals, care homes, the housing stock, pensions and benefit systems.

Countries are running out of agricultural space countries attempting to own land in other countries to feed populations back home.

7.2.2 Education

When more people were educated they requesting blue collar jobs so there will be a race for jobs.


This would reduce sales in businesses and they will unable to pay their debts. Too much of health realization quality and stranded would be a threat to

bussinesees when producing their product.

7.2.4 Work Pattern

Some employers will get stress full by routing the same work pattern and their productivity become less.


Spending will directly connected to debts, so spending more money lead to too much of debts.

The more people spend money to unnecessary wants essentials products will ignore.


People who graduate from good universities tend to get better jobs and make more money.

Middle class and Poor class cannot afford better health care.


8 Conclusion

In this project Author discussed about U.S economy downturn by referring to economic and social factors and the how that affects on realty businesses by describing the opportunities and threats.

The United States of America has the largest and still the most important market in the world. According to the CIA World Factbook, (2007) GDP is believed to be $13.84 trillion. The United States economy produced roughly $15 trillion worth of goods and services in 2008. (CIA World Factbook, 2007)

The American economy began to slow significantly, the recent failure in the U.S housing and credit markets as resulted in a downturn in the U.S economy. According to the CIA World Factbook, (2007) In 2007 GDP growth was estimated at 2.2% but in 2008 it is projected to be just 0.9%, down from the 10 year average of 2.8%.

The US consumer is also a big driver of global economic activity. The US government makes full use of economic tools such as money supply, tax rates, and credit control, among other things, to adjust the rate of economic growth.

American consumers are also increasingly dependent on debt and have been re-mortgaging their houses to higher loan amounts. Between 2007 to 2009 American consumers and Businesses faced to a crisis. Many workers lost their jobs and realty businesses crashed because of people not paying their mortgages back due to inflation. Many Businesses were bankrupt and collapse of large financial institutions. Credit rating agencies and investors failed to accurately price the risk involved with realty businesses. During the economy downturn after people spend their money to full fill their essential goods and services they didn’t got enough money to pay their mortgage, because of that entire realty business worstly affected.

Over the last few decades recessions have become less common than they once were. Ben S. Bernanke, the Federal Reserve chairman, and others have described this development as the "great moderation."While the economy used to swing between expansion and contraction every few years”.


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