US Economy in 2007

In the year 2007, the US economy experienced one of the biggest recessions in the recent times after the great depression (Morley, 2007). According to economic analysts, the downturn of the US economy in the year 2007 was fueled by the collapse of the housing market. Home prices dropped by more than 20 percent in the year 2007. Home equity borrowing declined as homeowners lacked adequate equity to borrow against it. Spending went down, which, in return, resulted in reduced consumption. Eventually, the US economy went into a recession.

During this year, many individuals lost their jobs as the employers tired to cut down on their operating expenses in order to survive the recession. The unemployment rate hit the hight of 5.0 percent in December 2007, which is the highest rate since the beginning of the year 2006 when the US economy gained almost full recovery after the 2001 downturn. The average unemployment rate was 4.7 percent (US Department of Labor, 2007). The average inflation rate in the year 2007 was 2.85 percent, with highs of 4.31 and 4.08 percent in November and December respectively. High inflation rates were experienced in the year 2007 because the price levels of consumer goods were high, fueled by increased cost of production and high prices of raw materials.

The investment market also experienced huge downturns as interest rates went down to a low of 4.297 percent in December 2007. Investors in the money market suffered huge losses. The average interest rate for the year was 5.27percent. The US GDP also fell in 2007. Towards the end of the second quarter, GDP was approximately US$13,325 billion. However, at the end of the third quarter, it fell to US$13,120 quarter, but increased to US$ 13,305 by the end of the year. Overall decline in GDP during the year 2007 was approximately 2.5 percent (Morley, 2007).

One of the reasons as to why monopolies may be sufficient in an economy is that it regulates the supply of essential commodities, such as water or health services. However, a monopoly may not be sufficient in an economy if it results in the exploitation of the consumers in terms of prices and commodity value. In addition, a monopoly may not be appropriate in an economy if it hinders the development of a certain industry/sector.

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