Make a Forecast Make a forecast of the following key data variables for this tim

Question

Make a Forecast Make a forecast of the following key data variables for this time next year (i.e., what will GDP growth be in 12 months). I want a number for each variable; I want a single sentence explaining why you think that number is reasonable. I do not care what number you choose, as long as you can support it with a one-sentence reasonable argument. I will use the forecast to evaluate whether your policy makes sense.

1. the GDP growth rate

2. the inflation rate

3. the unemployment rate For the next 12 months, what potential shocks would cause you to change your forecasts, and how would the shock affect your forecast (e.g., suppose oil prices jump: what happens to your forecasts)?

Make Policy This part will determine 45% of your grade on this project. Based on the current data, your analysis of the current data and your forecast of the economy over the next 12 months, determine the following policies:

1. Should the Fed increase, decrease, or hold constant the fed funds rate? Why?

2. Should fiscal policy-makers cut taxes or raise taxes? Why?

3. Should fiscal policy-makers reduce defense and non-defense spending or increase defense and non-defense spending? Why?

Explanation / Answer

1)The GDP growth rate for US is based on an autoregressive moving average method forecasted for about 2 to 2.5 % of growth rate in coming two to five years .

2)The Inflatiob rate is expected to remain between 0.9 to 1.5 % due to slow rise in the consumer price index .

3)Unemployment forecast suggests a stable stage in the uenmployent rate from 5% but is expected to experience a rise of about 6 to 6.5% due to supply shocks .

4)The Fed is focusing on a tighter money supply policy there is a fall in the economic money supply from oct 2015 onwards .

5) There are new inflation based tax systems introduced and tax deductions have incresed by the fed . This is mainly to increase government revenue and increase government surplus .

6)Defense expenditure is a necessary expenses made by the government for the safety and security of nations boundaries . In order to ensure the same government always need to have planned expenditure which is based upon the need of the country and its defense decisions .

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