The Aftermath of Hurricanes

Recently, the U.S. was attacked by the two hurricanes, Katrina and Rita. Due to these natural disasters, AmericaЎЇs economy will be affected severely if the Federal Government doesnЎЇt take actions in time. The aftermath of hurricane Katrina has already appeared: the unemployment rate has increased, the gasoline price has increased, etc.

Being in a mixed economical system, how the government can help to maintain a stable price level or even increase our capacity to produce during the hardest time seems to be the most important and intractability.

A basic challenge for policy makers is to eliminate unemployment and keep the economy on its Production Possibilities Curve, whereas the direct infection of Katrina is unemployment. To the statistics, the newest unemployment rate has risen to 6.1%.

Ў°Tightening too much could rattle the finial markets and know away the supports under housing, which has been a major driver of consumer spendingЎ±. This will lead to a severely weakened economy eventually. Obviously, the above statement shows the rule of the mixed economies. Both market and government should arrange the economic system, include the government formulating some laws and policies to keep the market stable.

It left the question of how the Federal government will deal with the existing problem so as to avoid inflation growing severely as the aftermath of the hurricanes. Inflation is due to the factors of how much money people are able to pay for their purchases, how the situation of supply and demand is, and how the government policies are.

For the hurricane has strongly destroyed the city of New Orleans, the aftermath of Katrina has claimed almost all of the jobs of the citizens, and the supply disruptions as well. LetЎЇs see how the supply and demand curve is likely to change? The supply shocks from Hurricanes outside of energy add to potential core price pressures. If the demand falls by the same amount as the loss of output, the demand curve shift rightward illustrates an increase in demand. When demand increases, the equilibrium price rises, and there comes the shortage. When shortage appears, the market has the function of self-adjusting prices. Thus, a higher price tends to evoke a greater quantity supplied, that is, the buyers well compete for services by offering to pay higher prices. These relate to the statement that says, Ў°shortages