Economic and social factor analysis



This assignment discuss about the economic and social factor analysis and discuss their affects related to recent economic downturn in United States. However all the factors of social and economical issues are not discussed in this assignment but the major factors that come under this scenario is discussed in the assignment.

Brief introduction about United States

World fact book (2010) Britain's American colonies broke with the mother country in 1776 and were recognized as the new nation of the United States of America following the Treaty of Paris in 1783. During the 19th and 20th centuries, 37 new states were added to the original 13 as the nation expanded across the North American continent and acquired a number of overseas possessions. The two most traumatic experiences in the nation's history were the Civil War (1861-65), in which a northern Union of states defeated a secessionist Confederacy of 11 southern slave states, and the Great Depression of the 1930s, an economic downturn during which about a quarter of the labor force lost its jobs. Buoyed by victories in World Wars I and II and the end of the Cold War in 1991, the US remains the world's most powerful nation state. The economy is marked by steady growth, low unemployment and inflation, and rapid advances in technology.

What is Economy?

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"Economy can be described as the efficient use of the limited productive resources to achieve maximum satisfaction of human material wants."(Fernando; 2010) Economic factors:

  1. Economic growth rate
  2. Efficiency of financial market
  3. Business cycle stages
  4. Exchange rates and stability of post country currency
  5. Discretionary income
  6. Unemployment rate
  7. Inflation rate
  8. Interest rate

Source; (Authors' work)

Some economic factors that caused USA economy to decline

Economic growth rate

Economic growth rate refers to an increase in a country's annual output of goods and services. The rate of economic growth is often used as a measurement of changes in the standard of living. [Stanlake; 2006]

Opportunities of economic growth

If the gross domestic production is low the people will get encouraged to produce goods inside the country.

This production inside country help to produce more so it can be exported and earn a revenue for the country.

When there are more products inside the country, they will be able to compete with foreign market.

Threats of economic growth rate

When there is low GDP of a country means that there is an increase in unemployment rate.

Decline in GDP results to decrease the balance of payment account.

Economic growth can create environmental problems such as increase in noise, air pollution, road conjestions.

Source=(Author's work]

Unemployment rate

According to Fernando (2010) "Unemployment can be defined as the people do not currently have the jobs, people available to work immediately and people actively seeking for a job."

Types of unemployment:

Frictional unemployment

The time period the people spend between jobs can be described as frictional unemployment.

Structural unemployment

This unemployment is caused by when there is change in structure of industry and this develops when there is a permanent decline in the demand of a product.

Cyclical unemployment

When there is a change in business cycle(recession) all the activities of country go down. So businesses also get affected leading to create unemployment for workers.Source; (Author's work)

Opportunities of unemployment rate

When the people are cut from their business they have to pay less wages so by reducing the number of workers they can keep their profit margin constant.

Workers will get unemployment benefits as their neglected from the society.

Threats of unemployment rate

The people who are unemployed become burdensome to the economy as they do not contribute to the country's production purposes.

Increase in illegal affaires such as murdering, robbery, etc;

On the other side businessman lose it's revenue as there is no production in the organization.

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Source=(Author's work]

Exchange rate

According to Stanlake (2006) The rate of exchange is the price of one currency in terms of another. Like other prices, the rate of exchange is determined by demand and supply. The rate at which the pound exchanges for other currencies depend upon the demand for and the supply of pounds in the foreign exchange market.(Stanlake 2006)

Opportunities of exchange rate

The people can predict future exchange rates and earn a profit this is known as speculation.

If USA's currency appreciate that means their purchasing power will increase as they can buy more products than before.

Threats of exchange rate

If the country's currency depreciate they have pay more to buy another currency.

When predicting the exchange rate sometimes the rates increase or decrease rapidly so speculators face shortages in cash.

Source; (Author's work]

Inflation rate

It is continuous rise in general price levels of goods and services over a period of time. Due to inflation the value of money is falling. It means that when prices are increasing the purchasing power of money is falling.(Fernando;2010)

Opportunities of inflation rate

Inflation may encourage firms to expand. Low and stable inflation may make businessman optimistic about sales.

Inflation reduces the real burden of any debt that household and firms have built up. This means that some households and firms will avoid going bankrupt.

Threats of inflation rate

Inflation causes a fall in value of money. That means when there is a higher inflaton rate the purchasing power of money falls rapidly.

A fall in demand for a country's product may create unemployment.

Inflation will badly affect to balance of payment.

Source; (Author's work)

Interest rate

According to Cartwright(2001:p106) states that "The repayment of loans to both individuals and organization comprises the repayment of the capital sum borrowed and an additional amount known as interest. Interest represents the earnings made by the lender and the payment for the typing up of the capital."

Opportunities of interest rate

When there is high interest rate the people will borrow less money from banks so the money in people hand get decrease leading to control inflation.

Low interest rate will encourage investors to take loans and invest in businesses so this lead increase production inside the country.

Threats of interest rate

When there is high interest rate the people will tend to save more rather than borrowing, so money in their hands will decrease so the purchasing power will decrease leading to a decline in demand for goods and services.

When interest rate increases cost of borrowing also increases and the firms profit will decrease as they have to pay high interest so their output also decrease.

Source; (Author's work)

Social analysis

According to Google (2010) "The term social analysis or societal analysis is not always used in the same sense. In the narrow sense it means an attempt to analyze a situation or a social problem objectively, independent of the doer and the purpose of the analysis. Therefore, social analysis is not a ready-for-use tool to solve social problems."

Social factors that caused USA economy to decline

  1. Demographics
  2. Work patters
  3. Spending habits
  4. Leisure
  5. Health
  6. Attitude
  7. Education

Source; (Author's work)

Work pattern

The term work pattern defines how the work revolution has taken place over a period of time. (Fernando; 2010)

According to Cartwright (2001) it states that "Government have slowly legislated to control the time without rest spent at work. Firstly, in the UK and other developed countries legislation was enacted restricting the working hours of children. This was before the enactment of legislation making firstly primary and then secondary education compulsory".

Opportunities of work pattern

When the work patterns are changed the employees do not get bored and they will stick to the business.

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Early years people worked from early morning until the evening so they didn't have any innovation but when work pattern get changed the employees came out with craftsmanship.

Threats of work pattern

This reduces the amount of time as the work patterns are changed so they do not get much time for production purposes.

As managers of the business have their own work pattern the customers get frustrated as they change from time to time

Source; (Author's work)


According to Brooks and Weatherston(2000,p213) it states that "life long learning is also important because companies need consumers who need to be re-educated to fuel their desire to consume. Learning can create new markets for info-tainment and cultivate tastes for new lifestyles".

Source; (statistics of education)

Opportunities of education

Those with better education can contribute to the society by innovating new products to the market and thereby competing with international market.

Well nourished literacy rate will produce more output of highly skilled labour.

Threats of education

Uneducated workforce will always produce goods in low quality, more wastages so this result to increase prices of goods in the market.

If there is more uneducated work force investors will not be attracted towards the country so this arise to more problems such as inflation, less production, etc;

Source; (Author's work)


The release of the body with stress, tension and strain of work can be defined as leisure. And the relaxation is a right of human labour in western world. (Yahoo; 2010)

Some leisure activities in USA:

Opportunities of leisure

The employees will come out with new ideas as their minds are relaxed after their leisure time.

As there is more leisure the workers will fix to the business as they do not have to work all working days.

Businessman can get profits because when they produce in relax minds the output will be more so he can keep the constant profit margin.

Threats of leisure

Sometimes leisure activities create health issues so this affects to the business.

More leisure will result less time to cope with production purposes.

Source; (Author's work)


According to Brooks and Weatherston (2000) it states that "Health concerns have been high on most people's agendas for a number of years. It is evident that health consciousness, for many, is not a passing pad, but stimulating a change in lifestyles. It is having an impact in many communities and across major business sectors".

Opportunities of health

If the employees have good health they are able carry their task smoothly.

Government do not have to spend on medical facilities when the employees are protected from diseases and other harmful effects.

The businessman should take necessary steps to avoid using cigarettes and alcohol in their factories.

Threats of health

When elders use these alcohol and things it gives a bad effect to the society.

When people die of these diseases their family has to look after by the businessman as he had worked in his factory.

Source; (Author's work)

Spending habits

This refers to the how people spend their money according to various factors.

They are;

  1. The income gained
  2. The cost of living
  3. The interest rate and saving
  4. Borrowing pattern

The people with high income will tend to spend on luxury products while the people with lower income levels likely to spend on basic needs such as food, housing, etc;(Fernando; 2010)

Opportunities of spending habits

The people can consume both essential and luxury goods if they have high income.

If the interest rate is high the high income earners can save money so they can get an interest.

If the cost of borrowing is low the businessmen can get loans and invest in business purposes.

Threats of spending habits

The people who get low income will satisfy the basic needs so there can be class discrimination.

Low interest rate will result to take more loans by individuals so they can be in a situation of losing money and repaying it back.

Source; (Author's work)


According to Brooks et al (2004) it states that "Demography concerns the study of population and population change and can be seen as another important factor that will affect the business environment. Whereas many of the environmental indicators such as social and technology trends are hard to forecast, the impact of demographic changes can be more confidently predicted".

Opportunities of demography

When the population is increasing there is more labour to carry on the production purposes.

High death rate and normal birth rates in USA results to have more goods and services within the country.

They have a low life expectancy so the pensioners and other people who are retired will not contribute to the dependency ratio.

Threats of demography

The major problem in increasing population is that the resources will be scared for the nation.

The government has to spend more money on medical facilities as they have a low life expectancy.

Source; (Authors' work)


So when looking into opportutnities and threats of USA economic and social factors we can conclude that USA has faced many circumstances in their economy downturn. They have had low gross domestic products, a change in inflation rate, unemployment rate has increased so these have affected more towards the country. So when I reach this assignment I noticed that now the USA is getting back to their normal position.

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