Economy of America for GDP Growth Rate - myassignmenthelp.com

Question: Discuss about theEconomy of America for GDP Growth Rate. Answer: Outline Of The Nations Gdp History Figure 1: GDP growth rate Taking look on past 30 years data of gross domestic production of the United States of America, a cyclical pattern in the fluctuation can be identified. This fluctuation over period of time stem from various macroeconomic, political, international phenomenon and so on. During 1990 and 1991 the growth rate of GDP has been very poor recording -0.1% in 1991 The ongoing recession is the reason behind such. From then till 1999 the growth rate showed increasing rate but fell in 2000 due to tech bubble crash. In the 2001, the growth rate fell and became nearly 1% than the previous year. The terrorist attack of 9/11 was the driving reason behind this downfall. The growth rate increased thereafter but then again stumbled in 2007 that led to negative growth rate till 2009 due to bank and financial crisis. Recently the growth rate has declined after a fluctuation due to the current presidential issues and changes going on. Year GDP Growth Rate(in %) Real GDP(in $ trillion) 1986 3.5 $7.86 1987 3.5 $8.133 1988 4.2 $8.48 1989 3.7 $8.79 1990 1.9 $8.96 1991 -0.1 $8.95 1992 3.6 $9.27 1993 2.7 $9.52 1994 4 $9.905 1995 2.7 $10.18 1996 3.8 $10.56 1997 4.5 $11.04 1998 4.5 $11.53 1999 4.7 $12.07 2000 4.1 $12.56 2001 1 $12.68 2002 1.8 $12.91 2003 2.8 $13.27 2004 3.8 $13.77 2005 3.3 $14.23 2006 2.7 $14.61 2007 1.7 $14.87 2008 -0.3 $14.83 2009 -2.8 $14.42 2010 2.5 $14.78 2011 1.6 $15.02 2012 2.2 $15.36 2013 1.7 $15.61 2014 2.6 $16.01 2015 2.9 $16.47 2016 1.5 $16.72 Figure 2: GDP of USA Measures of Expanding Production Possibility In terms of nominal GDP USA is worlds topmost country that holds second position in the world economy as per purchasing power parity. The country is dominated by service sector production accounting to 79.5% of the GDP followed by 19.4% contributed by industrial sector and only 1.1% of GDP is reflected through agricultural sector. The country is enriched in its science and technology and incurs huge investment in research and development. USA being worlds second largest manufacturer leads in manufacturing of airplanes. Moreover it is the greatest produces of military and defence equipment and exports to the world. The country is abundant in resources and comes up with newer technology to reap the benefit of the resources through enough investment in technology. Growth of capital accumulation along with enhancing human capital and restricted population leads to increased per capita wealth and GDP expanding the economic activities beyond the production possibilities. GDP OF USA, JAPAN CHINA China and Japan are the two of global economies that are well comparable with USA since they follow the country in terms of GDP and performance of economic indicators. The recent data analysis shows that both the USA ad Japan records GDP growth rate near about 1-1.5% whereas China experienced growth rate of 6.7%. Even though three of them are large mixed market economy and producer of manufacturer, the China faces more growth rate of GDP due to the fact it has largest and also growing consumer market. The demand emanating from this global and domestic market demand pushes more production and export as well as domestic consumption. USA has lesser growth rate compared to China du e to lesser market expansion. Notable Business Cycle Periods Business Cycle Reference Year Duration (in months) Peak Trough Contraction Expansion Aug 1929 Mar 1933 43 21 Feb 1945 Oct 1945 8 80 Dec 1969 Nov 1970 11 106 July 1990 Mar 1991 8 92 Mar 2000 Nov 2001 8 120 Dec 2007 June 2009 18 73 The above table depicts the major peaks and troughs recorded by the economy of USA overtime from 1930 till recent time. The great depression worlds longest economic recession took place in USA that led to contraction of the economy through 43 months continuously. After that many short term fluctuation was diagnosed in the country but the contraction period was not more than 18 months that took place recently in the subprime mortgage crisis and consequent global financial crisis. The largest expansion period has been followed by the 2001 recession that was almost 120 months during which the economy recovered and reached next peak. The recessions of 1970 and 1991 faced 106 and 92 months of expansion respectively. The recent global financial crisis made the economy face contraction for 18 months followed by expansion of 73 months due to the greater impact on the entire global economies of the world strongly connected to USA. Nation's Currency The official national currency is US dollar. For purposive benefit the dollar is subdivided into 100 small cents or 1000 mills. Federal Reserve Notes are denominated the US dollars forms the paper money in circulation. US dollar most used currency in the international trade and business transaction. As a result US dollars owns the importance of worlds primary reserve currency. Consumer Price Index The set of consumer prices for basket of goods and services in the country are well captured by the US Consumer Price Index. It is calculated and estimated by Bureau of Labour Statistics. The CPI of 2016 was 245.03 in terms of the base year 1982 when price level considered to be at 100. Canada has lower price level as compared to USA captured by the CPI being 130.50 in 2016. It can be seen compared to other growing nations of the world , the price level of USA is found to be more stemming from inflation. INFLATION Currently the inflation rate of the nation is 1.90% compared to last years 1.70%. The highest rate of inflation as faced by the nation is 23.70%. The sharp increase in USA has been due to consecutive expansions following frequent recessions and financial crisis. Moreover the expansion in the business and shortage of supply leads to higher growth in the price of raw materials. The cyclical upswings make primary input goods in the industrial production dearer. This indicates the cost-push inflation. Agricultural prices face the demand-pull inflation where price hikes based on the demand increased. Changes in supply of agricultural goods play the pivotal role in changing the price level. Existence of both cost push and demand pull inflation. Exchange Rate The exchange rate of national currency derives its value from the transaction and conversion of other currencies of other nations. Following are the exchange rates of USA with some of the nations. Figure 3: US dollar Exchange Rate (source: X-rates) Japan and India seem to have higher values of dollar compared to other countries who have negligible amount of value per US dollar. Reference Bernholz, P. (2015).Monetary Regimes and Inflation: History, economic and political relationships. Edward Elgar Publishing. Desai, R. (2013).Geopolitical Economy: After US Hegemony, Globalization and Empire (The Future of World Capitalism). Pluto Press. Desai, R. (2013).Geopolitical Economy: After US Hegemony, Globalization and Empire (The Future of World Capitalism). Pluto Press. Gordon, R. J. (2014).The demise of US economic growth: restatement, rebuttal, and reflections(No. w19895). National Bureau of Economic Research. Jorgenson, D., Gollop, F. M., Fraumeni, B. (2016).Productivity and US economic growth(Vol. 169). Elsevier. MacDonald, R., Stein, J. L. (Eds.). (2012).Equilibrium exchange rates(Vol. 69). Springer Science Business Media. Summers, L. H. (2014). US economic prospects: Secular stagnation, hysteresis, and the zero lower bound.Business Economics,49(2), 65-73.