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Rio Grande Valley is a large section of the United States along the country’s southern border. The region has also been termed by many as the Valley. This territory is made up of several counties that include “Starr County, Hidalgo County, Willacy County and Cameron County” (Levine 279). Most importantly, it is situated in the southernmost part of South Texas, which is the northern part of Rio Grande. That way, it can be said to separate Mexico from the United States. It is a flood plain where farming takes place. It is characterized by oxbow lakes due to the numerous meanders in the region (Levine 284). The physical nature of the territory is more interesting to watch where it serves as a tourist attraction. The region is under manifold economic projects, tourism being one of them, whereby some economic challenges chip in. They make the region one of the poorest ones in the US. Issues such as the macroeconomic ones are really common here. Therefore, for the efficient development of the region, solutions to the problems ought to be found and implemented into the economic projects. The essay aims at reflecting on the challenges, specifically on the macroeconomic ones, the possible consequences of delaying resolutions and the feasible mechanisms that can be applied to solve the problems.
Macro-economic challenges within an economy are coordination problems that result from factors that mesh the production plans with the consumption demands. The lack of coordination with regards to them is mostly a result of the changing environmental circumstances. For an efficient economic development, macroeconomic factors require a stable economic environment whereby they should be efficiently implemented into the economic development projects (Borio 16). Macro-economic challenges affect various areas such as the employment sector, the national income, aggregated supply and demand, total savings, wage level and the general price level. They can also lead to another large crisis such as economic inflation. Therefore, the macroeconomic factors should be well handled to ensure that they do not adversely affect the region’s economy.
Macroeconomic problems in the Rio Grande Region are manifested in various ways. The challenges are mostly felt here due to the fact that the United States economy is not dependent on the one of separate counties. Therefore, issues experienced in one region are most likely not to be noticed in other. This means that the macroeconomic challenges present in the Rio Grande Valley are felt within the area only. The problems of the Valley are the unemployment, inflation, fluctuations, wage levels and the general price levels of commodities (Faruqee and Tamirisa 41).
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The main reason of why the challenges are experienced is the unorganized planning. The authorities have been experiencing common leadership issues whereby the process of economic planning in the region has been adversely affected. This is evident from the fact that the county governments in the area are independent from one another. The economic policies that the governments come up with are responsible for the economic growth of the whole region. However, the four counties have developed unsound policies that negatively influence the economic progress. Therefore, the main cause of the economic strains in the Rio Grande Valley is the authorities’ role in the development of the economy.
As for the unemployment, it is mainly evoked by the lack of coordination between labor and capital. It is reflected in the realm of the resources that the region has It should be stated that the four counties are rich in resources. However, the ones present in the area are inadequately exploited creating the state of imbalance. The ones that are not used lie idle without benefiting the people in the region.
Furthermore, farming in the region could do well due to the availability of a better climate and the favorable soils (Sinai 52). However, the rate of farming in the Valley is low which leads to unemployment. Apart from farming, the region has various industrial capabilities whereby various industries can be initiated ranging from agriculture to other spheres. Consequently, it can help in developing its economic status. Therefore, the resources in the Rio Grande Valley region are numerous but the lack of their exploitation has led to the unemployment crisis.
The macroeconomic problem of unemployment in the Valley is also caused by the large population. The region is overpopulated whereby the resources available to sustain the citizens in terms of employment are few. According to the US statistics presented as a result of the census carried out on January 1, 2012, the population of the area was one million three hundred and five thousand seven hundred and eighty two. It has been described by the US census bureau as a large population that cannot be maintained by the available resources in the region. Therefore, it is another big challenge for the territory’s macroeconomic development (Borio 37). The employment rate in the region is able to only satisfy the needs of about seven hundred thousand people.
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The lack of coordination in resources in the Rio Grande Valley is mainly caused by the overreliance of the population on the basic income generating activities. It leads to the stagnation of the economy. The economy in the area is based on the profits generated from the agribusiness and tourism sectors (Faruqee and Tamirisa 62). Both of them are highly dependent on to sustain the population. However, such overreliance creates a strain on the resources affecting the macroeconomic factors (Borio 39). As a result, macroeconomic problems chip in leading to deterioration of the region’s economy.
Macroeconomic challenges are also reflected in inflation rates in the Rio Grande Valley. Inflation refers to the rate at which the value of the currency in a given region depreciates, and it can be reflected in various aspects. In the Valley, it has been experienced in terms of the wage rates, price levels and the banking rates. The banking system in Rio Grande Valley has at times shown to be insolvent. This is an economic depreciation factor that leads to the decline and undermining of the macroeconomic factors. The insolvency of the banking system in the region is mainly caused by the high rates of debts that the people in the region owe the banks. The banking systems also fail to perform appropriately due to the lack of exogenous policy action (Sinai 61). The given sector in the region has led to the stagnation of assets prices. Therefore, the liquidation prices in the region have high interest rates. Moreover, the rate of cash flow in the area is influenced by the banking system whereby the rate is high (Krawczyk and Kim 55). Therefore, the issues in the banking system have led to the high inflation rates in the region hence macroeconomic challenges.
Price levels and the wage levels are other factors that have affected the inflation rates in the Valley. Inflation here has been dependent on the levels of commodities prices and the wage rates. The region has experienced high wages due to the pressure of the population demanding increase in payments. This has resulted in the rise in the salaries along with increased depreciation of the region’s economic status (Krawczyk and Kim 23). Therefore, inflation tends to be caused by high levels of wages. The prices of commodities in the region also have impact on the inflation rate. Recently, there has been a rise in the given prices that creates a high cash flow into the money market (Borio 41). Therefore, the value of currency depreciates due to the increased cash flow hence leading to inflation.
The macroeconomic challenges faced in the Rio Grande Valley can lead to consequences that may be felt on the whole territory of the United States since the region covers four counties. They contribute a significant amount of economic income to the national government. Therefore, the issues are most likely to affect the whole country leading to threatening outcomes. The main ones include deleverage of the banking system, inflation in terms of nominal asset pricing and the increased debt margin (Borio 64). However, the negative results of the macroeconomic challenges could only affect the United States if they are not handled. The banking system of the US could be the main area affected by Rio Grande Valley’s macroeconomic challenges. It could be deleveraged through the inflation. The impact on the banking system would also be felt in terms of bank debt purchasing power (Faruqee and Tamirisa 34). The continued central bank purchases of sovereign debts would be adversely affected whereby the debts would be perpetuated. This can result in the low interest rates in the banks. In addition, asset monetization would be affected whereby the bank deposit liabilities would experience a number of reversals. Therefore, the banking system would be negatively influenced and the efficiency of the banks would decrease that might lead to the collapse of the banking system (Krawczyk and Kim 65). Nominal asset pricing would also be another consequence of the inflation. Nominal assets are commonly registered in the bank reserves. This means that their use would be a negative move in the economy. The macroeconomic problem of inflation would result in the exploitation of these nominal assets so as to bring a balance in the cash flow in the money market.The inflation rate would also result in the growth of nominal bank reserves (Sinai 78). This is because inflation may create a high cash flow forcing the banks to absorb the money in the money market. Therefore, the growth and the decrease in the nominal assets reserves create an illusion in the returning strengths to the balance sheets (Faruqee and Tamirisa 37). This is an adverse effect because the assets’ pricing would be made to be highly flexible hence unreliability of the banking system.
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Political consequences would also be felt as a result of the macroeconomic challenges. This is because the United States political affairs are dependent on the wealth levels. The issues would lead to the rise of the asset prices since the wages and the consumable pricing would be high (Borio 78). Therefore, the wealth and income redistribution would be in a rate of one percent. Thus, the wealth redistribution factor would lead to a shift in the political games in the US. Undoubtedly, the political consequences whose effects cannot be predetermined would lead to the decline of several factors within the country (Krawczyk and Kim 71).
The macroeconomic challenges can be solved using appropriate methods. The solutions explain the weaknesses that the macroeconomic problems pose to the economy, and they aim at eliminating them. The resolutions include the classical approach, the Keynesian approach and the Keynes’s approach (Krawczyk and Kim 43). The classical approach to macroeconomic problems aims at streamlining the market discipline status. Most of the issues are caused by market indiscipline and, thus, disorganization of the economic policies. The classical approach insists on the proper planning of economic projects (Zhang 26). For instance, the inflation rates as a challenge can be controlled using the classical approach since the measures of reduction of money in the cash flow help in sustaining the market discipline. Therefore, inflation can be solved using the classical approach solution.
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The Keynesian approach involves the government involvement in the solution of the challenges. According to it, the government is required to introduce efficient policies that help in reducing the impact of the problems and, finally, solving them (Krawczyk and Kim 75). For instance, the government can introduce the fiscal policy. Fiscal policy is usually applied to deal with the inflation because the currency value is controllably managed. In addition, the fiscal policy would help in solving the unemployment challenge. The Keynesian approach would also assist in overcoming the macroeconomic challenges through the demand and supply factors (Faruqee and Tamirisa 44).
The Keynes’s approach of solving the macroeconomic challenges can be applied on the market level of the macroeconomic challenges. Mainly, it aims at dealing with the problems through management of the market equilibrium. Market equilibrium factors include the demand and supply (Zhang 36). The approach ensures that there is a balance in the demand and supply of commodities in the market. Through the realization of the equilibrium, the macroeconomic challenges are solved. For instance, market equilibrium helps to overcome the unemployment and inflation issues. Therefore, the Keynes’s approach proves to be an efficient solution to the macroeconomic challenges.
In summary, macroeconomic factors are factors that contribute to the development of a country’s economy. They include employment rate, wage rates, market forces and the prices levels among many others. The challenges in the macroeconomic sphere reduce the efficiency of the macroeconomic factors. Therefore, they should be addressed effectively to ensure that the economy is not negatively affected. In Rio Grande Valley, the problems demonstrate their nature in degrading the economy. As a result, the solutions to the macroeconomic problems should be implemented to ensure that the issues are not rampant. The classical, Keynesian, and the Keynes’s approaches help in overcoming the challenges.
In conclusion, the macroeconomic challenges nature is threatening to a country’s success. They can easily lead to the degradation of people’s living standards due to their role in affecting the economy. However, solving the challenges would help in creating a favorable environment around the macroeconomic factors. Therefore, the solutions to the challenges should be readily and efficiently available to deal with the problems.