The Governments Role in Shaping the US Economy

Abstract

Course name Instructor’s name Assignment due date Role of Government on the Economy The government and politics play a major role in the economy and determining solutions for challenges affecting the country. A necessary government agency influencing the economy is the U.S. Agency for International Development since it partners with international organizations to influence international and global trade. Locally, the Federal reserve regulates the cost of borrowing through interest rate changes. However, some of the government’s regulations on trade are unnecessary and should be minimized to allow free economic activities (Day, 2022). The control of the debt ceiling is a political gimmick that involves the politics of the Congress and the executive. Additionally, the government’s control over the valuation of currency fails to address the underlying economic issues. While the government’s role in economic diplomacy and controlling inflation levels are necessary, regulating the debt ceiling and the valuation of currency should be minimal since they are political tools with minimal benefits. The United States economy depends heavily on the local and international actors influencing global trade. One of the necessary agencies controlling the country’s economy is the U.S. Agency for International Development that works with global organizations to monitor global economic issues. Policy-makers must acknowledge the dynamic nature of the American economy and the implications they have on the country (McFaul, 2020). Economic diplomacy will play a major role in facilitating the America’s role on the future of the global economy. As actors and their interests change, it is critical that the policy-makers in the United States seek to forge potentially valuable relationships with international players. The agency is important since it works with The World Bank to determine challenges and solutions related to global economic issues. America’s interventions in the global economic issues play a valuable role in facilitating economic diplomacy in the country. The Federal Reserve plays an important and necessary role in regulating the level of inflation to stabilize the economy. In particular, it raises the interest rates to slow the demand for products by raising the cost of borrowing to the consumers. Stabilizing the inflation rates has significant and important implications on the American market since it affects the supply and goods of key products (Curry, 2023). For instance, the government has the responsibility of managing the economy by stabilizing the availability of capital. I agree this is an important tool to regulate the economy since it keeps the level of inflation in check and influences the prices of key commodities. For instance, raising the interest rates has the potential to effectively manage the market prices of key imports such gas and make them available to the regular consumers. The Federal Reserve’s regulation of interest rates is a necessary tool to monitor and manage inflation levels particularly when they are affected by global economic and political factors (Day, 2022). On the downside, uncontrolled changes in the interest rates have the potential to cause a recession leading to job losses and a decline in supplies. While raising the interest rates facilitates the monitoring of inflation levels, it has the potential to cause a recession and negatively...