THE ECONOMIC STATE OF UNITED STATES

THE ECONOMIC STATE OF UNITED STATES

QUESTION ONE

The US GDP (Gross Domestic Product) from the Year 2006.

Gross Domestic Product (GDP) refers to the market value or the whole monetary value of the products manufactured in the interior borders of a country during a definite period. GDP offers the economic rate of a particular country, and hence can be used to derive the economic growth rate of the country. The following table indicates the GDP of the United States from the year 2006-2009.

Graphical Representation of the above date

Unemployment Rate in the U.S. from 2006 to 2019

Unemployment occurs when people are willing to find work but can’t find a job, this in turn, leads to reduction in the economic Output. The average rate of unemployment in the United States is 5.50%. The following data indicate the rate of unemployment in the U.S. from 2006 to January 2020.

Inflation Rate in the U.S. from 2006 to 2020

Inflation refers to a rise in general price of the services and goods in the economy of a particular country on a given period (Anon, 2009). The unit of currency purchases fewer services and products after an occurrence of inflation. The following table shows the inflation rate in the U.S. from 2006 to January 2020.

Graphical Representation of Inflation rate in the United States

Description of the periods of economic expansion, peak, contraction and trough based on the data from the three graphs above.

The level of the GDP denotes the rate of economic expansion. For instance, in 2018, GDP is high (at 2.9%). The data collected indicated that a rise in the GDP (economic expansion) lowers the rate of unemployment, the rate of unemployment in 2018 lowers to 3.9 % (Azar, 2013). A reduction in the unemployment results in an upsurge of wages; hence increases people purchasing power. An increase in the people purchasing power leads to a rise in the demand for services and goods; this, in turn, increases the prices of products and services (Mandel & Liebens, 2019). Hence raise the rate of inflation, the inflation rate at 2018 is high (2.4%). The data above indicates that increase in GDP in the U.S. lowered the Unemployment rate and lead to a rise in the inflation rate.

The data indicates that GDP is lower during the period of economic contraction. During economic contraction, the GDP is lower, for instance, in 2009 the GDP graph (GDP is at -2.5). Lower GDP means that there is a high rate of unemployment since there is a little amount of money in the economy; the unemployment rate was at 9.3 % in 2009. The rate of inflation is low during the economic contraction; the rate of inflation is -0.4% in 2009.

Peak refers to the topmost part of the business cycle; the U.S. economy is at a peak at 2.9 % hence lowers unemployment and raises the inflation rate (Azar, 2013). At trough, the economic activities are lowest, thus leading to high unemployment and lower inflation rate.

Impacts of Recession

Recession refers to the lower economic performance in the economy; it is regarded as a temporary period of the economic decline for two consecutive quarters. The recession hurts businesses and households. The decline in the economic activities leads to a reduction of the capital in circulation, this, in turn, lowers the purchasing power of a consumer, a reduction in the purchasing power reduces the overall profit of the businesses and to some extent makes business to incur significant losses. Hence inflation hurts the business, households and the entire society. For instance, the U.S. experienced a recession in the year 2009; this, in turn, leads to lay off of the employees and retardation of economic growth.

QUESTION TWO

The USA experienced a great recession in the year 2007 to 2009. The recession resulted from the housing bubble. The high prices of the housing during the period caused most of the borrowers to experience difficulties to fee their loans (International Monetary Fund, 2015). The U.S. government employed the use of fiscal measure to end the recession. Some of the programs initiated incorporated the Economic Stimulus Act in 2008; the other act was Reinvestment and Recovery Act of 2009.

Federal Reserve’s retort to the recession involved a massive amount of the nontraditional avenues. The Fed used “traditional” policy to lower rate of federal funds forms 5.25% in 2007 to 0 to 0.25% in 2008. The programs played a significant role in reducing the recession rate.

Fiscal and monetary policies are employed to enhance the stability of economic growth with low unemployment, low inflation and price stability (International Monetary Fund, 2015). Both policies have their advantages and disadvantages; however, when implemented properly, they act as excellent tools that help minimize the level of recession in a country.

Understanding the outcomes of the policies made by the government and policy agencies to stabilize the economy is critical (Sigdel, 2016). I feel that it is essential to understand the various relevances of the policies made by policymakers since I can be able to anticipate the periods of inflation and recession adequately. By following the policies created to raise economic activities, I can be able to buy more goods in advance to escape the high prices results goods and services during a boom.

References

‌ Azar, S. A. (2013). Oil prices, U.S. inflation, U.S. money supply and the U.S. dollar. OPEC Energy Review, 37(4), 387–415. https://doi.org/10.1111/opec.12008

‌ Mandel, D. C., & Liebens, P. (2019). The Relationship between GDP and Unemployment Rate in the U.S. International Journal of Business and Social Science, 10(4). https://doi.org/10.30845/ijbss.v10n4p3

‌ Sigdel, B. D. (2016). Effectiveness of Monetary Policies and Strategies: A Case of U.S. Economic Journal of Nepal, 29(1). https://doi.org/10.3126/ejon.v29i1.162

Anon. (2009). A large annual increase in health share of GDP expected in U.S. PharmacoEconomics & Outcomes News, 573(1), 10–10. https://doi.org/10.2165/00151234-200905730-00029

International Monetary Fund. (2015). Coordination of Monetary and Fiscal Policies. IMF Working Papers, 98(25), 1. https://doi.org/10.5089/9781451844238.001

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