compare and contrast the US economy to that of countries in the world

compare and contrast the US economy to that of countries in the world

Introduction

Macroeconomics involves aggregate structure of an economy, performance, and behaviour of the economy while microeconomics focuses on impacts and decisions of individual participants of the economy (Rode, 2012). Macroeconomics include gross domestic product (GDP), price levels, inflation, unemployment, national income, and economic growth (Singh et al., 2011).

The United States (US) economy is a mixed type of economy and highly robust. Mixed economy is whereby there is government intervention in a market as well as supply and demand forces controls the market (Caballero, 2010).

The topic will use data from various credible sources to compare and contrast the US economy to that of countries in the world.

Literature Review

According OECD Economic Outlook, the GDP of the US will drop from 2.3 percent in 2019 to at the rate of 1.9 percent in 2020. The unemployment will remain below 4 percent in 2020, while the inflation rate will increase to 1.8 percent in 2020 from the rate of 1.6 percent in 2019. The business fixed investments were decreasing slightly to 2.5 percent in 2020 from 3.0 percent in 2019. The long-term interest rate is falling slightly as well to 2.85 percent in 2020 from 2.75 percent in 2019, while the short-term interest rate was edging down to 2.55 percent from 2.6 percent in 2019.

The trade-weighted US dollar will rise to 2.3 percent in 2020 from 1.5 percent in 2019. According to The New York Times, The prices of oil and gas in the year 2020 is averaging at $ 60 per barrel which remains the same with that of 2019. However, the prices are rising and by 2025 the average will be at $81.73 per barrel. According to The New York Times, the US and China have a trade agreement of $200 billion value. However, the trade war between US and China is not over because trade tariffs stills exists on many Chinese goods and it is driving down the economy (Cavallo et al., 2019).

According to the Washington Post, President Trump’s tax cuts and reforms is driving down the economy because of increasing stock buybacks instead of increasing job creation in the economy. Despite the trade agreements, tax cuts, and low interest rates the US economy is growing at the moderate rate and it won’t pick much momentum soon.

According to IMF the global economy is at 3.3 percent growth rate up from 2.9 percent in the year 2019. According to the World Bank, the global economy is slowing to its lowest pace in 3 years. Climate change is beginning to affect the US economy and according to the US Government Accountability Office the cost of climate change in the economy per year is $112.

United States vs. Canada

According OECD Economic Outlook, the economy of Canada is growing, and the GDP is expanding at a rate of 1.8 percent in 2020, from 1.7 percent in 2019. The growth is a result of the increase in consumer spending and active labour markets. The increase in GDP will help Canada avoid the looming economic recession in 2020. In 2020 the inflation rate will range at 1.8 percent down from 2.2 percent in 2019. The interest rate remains at a rate of 2.75 percent. The economy is rapidly growing in Quebec, and British Columbia and real business investment are increasing at the rate of 1.5 percent from 1.0 percent in 2019 (OECD Economic Outlook).

The US and the Canada’s economy is both mixed type of economy. Both the economy of Canada and US are robust and developed. Both the GDP growth rate of US and Canada in the year 2020 are below 2.0 percent. The interest rate of both Canada and US in the year 2020 is below 2.75 percent. Both the inflation rate of Canada and US is below 2 percent in 2020. According to the World Bank, both Canada and US are the largest trading partners therefore their economies highly depend on each other. Both Canada and US are members to North American Free Trade Agreement (NAFTA) Organisation for Economic Co-operation and Development (OECD, and World Trade Organization (WTO). Both Canada and US are a high income economy. Both the economy of Canada and US is growing courtesy of service industries and manufacturing sector. The economy of the US is robust in terms of technological and aerospace infrastructure while Canada is less robust. The economy of Canada uses Canadian dollar for their transactions while US uses US dollar for their transactions. According to the IMF, the nominal GDP of Canada is $ 1.731 trillion and number 10 worldwide while US has the GDP of $ 21.439 trillion ranking at number one globally. According to KPMG, the corporate tax of US is at 27.0 percent while that of Canada is at 26.5 percent.

United States vs. China

According to the South China Morning Post the economy of China is declining and it is at the weakest annual growth rate in 29 years. According to the OECD Economic Outlook the GDP of China is at 5.9 percent growth rate showing a slight fall from 6.1 percent in 2019 and 6.6 percent in 2018. The decline rate of GDP in China and that of USA is almost at the same rate. However, the growth rate values differ a wide gap. The decline in economy attributes to trade war between the US and China though trade deal is in place (Cavallo et al., 2019). Both US and China’s economies are largest economies globally. The economies of both countries are market-oriented in which both the government, private sector, supply and demand forces are shaping the economy. According to the IMF In terms of nominal GDP the US is at $ 21.439 trillion making it the first globally while China is the second largest with the nominal GDP value of $ 14.14 trillion. Natural resources is driving both the economy of the US and China. In terms of purchasing power parity the US is the second globally while China is the first country worldwide. Both US and China share Japan, South Korea, India, and Taiwan as their largest trading partners.  The GDP growth rate of US is below 5.0 percent while that of China is above 5.0 percent. In terms of agriculture and industry sector China is ahead of US in which US is only 17.58 percent of China and 77.8 percent respectively. However, the service sector of US is doubling that of China. The population of China is 4 times more than that of US making per capita income of US to be 6.38 and 3.32 higher than that of China in terms of nominal and purchasing power parity (PPP).

United States vs. Germany

According to the World Bank, the economy of Germany is the biggest in Europe. In the year 2019, Germany avoided a technical recession. The growth of Germany’s economy is around 1.1 percent a slight increase from last year’s 0.6 percent. According to the OECD Economic Outlook, the unemployment rate in 2020 is at 5.3 percent up from 4.9 percent last year December. The fall in the economy of Germany attributes to the US-China trade war, political uncertainties of Brexit, and German car industry’s transition to electric power. The economies of both countries is mixed type of economy. Both the GDP growth rate of Germany and US is below 2.0 percent in the year 2020. Both countries have highly robust economies in which US has the nominal GDP of $ 21.439 trillion while that of Germany is at $ 3.863 trillion. The service sector of both countries is the main source of employment and has the largest labour force in both countries. Both countries are members of WTO and OECD. The unemployment rate of US is below 4.0 percent while that of Germany is above 4.0 percent. The main trading partner of Germany is the European Union while that of US is Canada. The main currency in Germany is the Euro while that of US is the US Dollar.

United States vs. Australia

According to The IMF, the GDP growth rate is at 2.5 percent up from 2.2 percent in the year 2019. The inflation rate remains at the rate of 1.9 percent. The unemployment rate is increasing and it is at 5.7 percent up from 5.5 percent from 2019. According to the OECD Economic Outlook, Interest rate continues to remain below 1.0 percent and it is averaging 0.75 percent although up from 0.25 percent in the year 2019.  Both the economies of the two countries are highly robust and high income economies. Both counties are members of WTO AND OECD. The GDP growth rate of both countries is below 3.0 percent. As well as the inflation rate of both countries is below 2.0 percent in 2020. Service sector is the leading contributor of GDP and labour force of both countries. The leading trading partner of Australia is China while that of US is Canada. The economy of Australia is experiencing continuous growth while that of US is experiencing slow growth.

United States vs. United Kingdom

According to the OECD Economic Outlook, the economic growth of the UK is slowing down in 2020. The annual GDP growth rate is growing at the rate of 1.7 percent 1.5 percent in 2019. The unemployment rate in 2019 records at 4 percent, representing an increase from 3.8 percent in 2019. The inflation rate is at 2.5 percent from 1.9 percent in 2019 though per month inflation rate is reducing, and currently, it at a 0.4 percent rate decrease from 0.6 percent in 2019. Interest rates in the UK increasing and are at 0.75 percent representing a significant increase from 0.5 percent in 2019. According to the IMF, the UK government debt to GDP is at 78.2 percent, showing a substantial decrease from 81.3 percent in 2019. Business and consumer confidence are increasing significantly from -14 and -6 in 2019 to -2 and -2 in 2020, respectively, while the corporate tax rate remains at 17 percent. Both the economy of the US and the UK is slowing down. Both the US and the UK unemployment rate is below 4 percent. Both the economies of US and UK are robust. Both countries are members of WTO and OECD. The nominal GDP of UK is at $ 2.744 trillion while that of US is at $ 21.439 trillion. The main contributor of labour force and GDP of both countries is the service sector. The GDP growth of both countries is below 2.0 percent in the year 2020. The unemployment rate of both countries is below 4 percent while the inflation rate is below 2.0 percent for both countries. The interest rate of UK is below 1.0 percent while that of US is above 1.0 percent. The UK main currency is the sterling pound while that of US is the US Dollar.

United States vs. France

The economy of Franc is growing steadily. According to the OECD Economic Outlook, the GDP is at the rate of 1.3 percent in 2020 a slight increase from 1.2 percent in 2019. The unemployment rate is at an average of 6.8 percent showing a drop in the rate from an average of 7.2 percent in 2019. Inflation rate is increasing from the arte of 1.2 percent in 2019 to 1.4 percent in 2020. Both France and US are members of WTO. Both countries are high income and highly developed. Services sector is highest contributor of GDP in both countries. The GDP growth rate and inflation rate of both countries currently is below 2.0 percent. The services sector of both countries is the leading labour force employer. The unemployment rate of France is above 4.0 percent while that of US is below 4.0 percent. The economy of France is highly diversified across all sectors while that of US is globally technologically robust. The main industry leading in France is chemicals industries while the leading industries in US are petroleum and natural gas. The nominal GDP of France is at $ 2.707 trillion placing the France economy at number 7 globally while US has the GDP of $ 21.439 trillion ranking at number one globally. Germany is the leading trading partner of France while the leading trading partner of US is Canada. In terms of easiness of doing business with US it is leading globally while France is ranking at 32^nd globally.

References

OECD Economic Outlook. Retrieved from https://www.oecd.org/economic-outlook/ on 28^th January, 2020.

Cavallo, A., Cal, M., & Laski, A. (2019). The US–China Trade War.

Rode, S. (2012). Advanced macroeconomics. Bookboon.

Washington Post. Retrieved from https://www.washingtonpost.com/ on 30^th January, 2020

The New York Times. Retrieved from https://www.nytimes.com/ on 30^th January, 2020

South China Morning Post. Retrieved from https://www.scmp.com/ on 30^th January, 2020

International Monetary Fund. Retrieved from https://www.imf.org/ on 30^th January, 2020

World Bank. Retrieved from https://www.worldbank.org/ on 30^th January, 2020

KPMG. Retrieved from https://www.home.kpmg/ on 30^th January, 2020

Caballero, R. J. (2010). Macroeconomics after the crisis: time to deal with the pretense-of-knowledge syndrome. Journal of Economic Perspectives, 24(4), 85-102.

Singh, T., Mehta, S., & Varsha, M. S. (2011). Macroeconomic factors and stock returns: Evidence from Taiwan. Journal of economics and international finance, 3(4), 217.

US Government Accountability Office. Retrieved from https://www.gao.gov/ on 30^th January, 2020

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