1. How does your savings compare with the national average? As stated above, Ame

Question

1. How does your savings compare with the national average? As stated above, Americans are saving less and less all of the time. How do you think this will eventually affect the economy and economic growth? 2. The recession which occurred in 2007 - 2008 is a good example of how a decrease in investment spending affects business cycles and ultimately the state of an economy. Reflect on past recessions including that of 2001. What did you personally see going on in the world around you which were signals of a recession taking place? Do you remember any specific instances which may have affected changes in inventory and therefore investment spending?

Explanation / Answer

America is on a dangerous budget path. Current spending and debt are dangerously high, and future spending and debt are on track to rise even higher in large part due to increasing entitlement spending. Academic research shows that advanced economies like the United States are at risk of significant and prolonged reductions in economic growth when public debt reaches levels of 90 percent of GDP. High public debt threatens to drive interest rates up, to crowd out private investment, and to raise price inflation. The implications would be severe and pronounced for all Americans, but most especially for the poor, the elderly, and the middle class. U.S. policymakers should learn from Greece and Japan and avoid a fiscal crisis and economic stagnation brought about by public debt overhang.

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