1 You now should realize how important it is for economists

1 You now should realize how important it is for economists to try and predict future conditions of the U.S. economy. Economists are also interested in the performance of the economy at a more local level. Discuss how local and national forecasts play an important role in the State and Federal levels. There have been significant discussions on the government\'s fiscal policy during the Great Recession. In particular, many did not like the government\'s actions in salvaging the auto industry in providing guaranteed loans to GM and Chrysler. What is your opinion? Provide economic reasons for your opinion

Solution

At a local level if we consider the \"ease of doing business index\" then the ranks are extremely important. An individual to start a business requires minimum amount of capital, number of people, number of construction permits to be availed , electricity purchase/ legal complications at a local level to start a business. So, if a country\'s economy is not performing then it can be easily seen from the ease of doing business index at a national level which helps predict the issues in starting a business at local level.
The Great Depression is a consequence of run of banks , asset bubble burst and many other factors like people\'s self believe with over confidence that \" This time is different\" led to many financial consequences and stock burst as well. In some countries like Greece the Euro Crisis happened to due excessive borrowing by the government from Germany which impacted entire European Nations. Similarly, US was also impacted by mortage loans as it was believed that the prices of houses will never come down but it came down due to high supply of houses and low demand.
No, the idea or the government actions to salvaging the auto industry in providing guaranteed loans to GM and Chrysler was not right because of the bank\'s problems like :-
1) The people who len money were not sure whteher they will get the money back, because no bank – no matter how sound – could pay back all its creditors at once.
2) Solvency cisis :- It is possible that the banks’ assets might have declined in value to the point where they are worse less than, or not much more than, their liabilities.
So, with the above two issues it cannot be predicted whether GM and Chrsyler will be highly productive and profitable company at any chance.