Eco2103 Macroeconomics Answers Assessment Answers

Answer:

Macroeconomics, Gross Domestic Product and Economic Growth

Source: Data.worldbank.org. (2018). GDP (current US$) | Data. [online] Available at: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US [Accessed 20 Oct. 2018].

Summary: The following part discuss about the GDP growth rate   and the economic growth of the United States. It also states about the basic issues of the macroeconomy of a nation.

 Analysis: The study of choice and the implications for both the quantity and price in the individual market is termed as microeconomics. It consists of topics which includes costs of production, demand for the product and the structure of the market. On the other hand, macroeconomics studies, the performance of the national economies as a whole. The economy of the United States is mainly dominated by technologically advanced service sectors which account for eighty percent of the output. The Gross Domestic product of the United States is 19.39 lakh crores USD. It has also been found out that the economy of the United States surges to A4.1 Percent growth rate. The growth rate of the US economy was known to be 2.3% annual change. The economy is also known to be a highly mixed economy. The United States is also known to have the world’s largest economy by the nominal gross domestic product. It also has a highly diversified industrial sector. The U.S dollar currency is also one of the most widely used currencies for international transactions. Then nominal GDP of USA was known to be $19.5 trillion in the year 2017 where about seventy percent of the U.S GDP is mainly personal consumption. The real GDP Per Capita was known to be $52,444 in the year 2017. The USA is also known to be the second largest industrial output in the world. The dynamics of the industry has changed a lot with the increase in the international trade and also have impacted the productivity of the United States economy.

Inflation and price level

Source: Tradingeconomics.com. (2018). United States Inflation Rate | 1914-2018 | Data | Chart | Calendar. [online] Available at: https://tradingeconomics.com/united-states/inflation-cpi [Accessed 20 Oct. 2018].

Summary: the following part discuss about the inflation level of the United States and the average price levels of the good.

Analysis: The sustained rise in the average level of prices is termed as inflation. The average prices of all the goods in the economy can be termed as price level. the percentage increase in the price level is known as the rate of inflation. It also reduces the purchasing power when the nominal income is kept constant. The annual rate of inflation in the United States of America stood at 2.9 percent in the year 2018. The inflation is usually measured with the help of consumer price index which includes percentage change in the cost to the average consumer of consuming a basket of goods. In the year 2016, the real household income was measured to be $59,039. Americans are known to have the highest average household income among then other nation. However, USA ranked 41^st in income inequality in the year 2017. The consumer price index of the United States increased to 251.99 index points in September 2018. The average CPI in the United States is 111.25. inflation is the general increase in the prices when the value of money goes down. By observing the rate of inflation in the United States it can be said that there has been a rise in inflation due to the rise  in demand for the goods and services which is relative to the supply.

Demand pull inflation

Wages and unemployment

Source: Data.bls.gov. (2018). Bureau of Labor Statistics Data. [online] Available at: https://data.bls.gov/timeseries/LNS14000000 [Accessed 20 Oct. 2018].

Summary: this part of the report defines the unemployment rate and also states about the minimum wages in the United States

Analysis: Unemployment is a situation where people are actively searching for jobs and are not being currently employed. Unemployment usually takes place when people are desperately looking for jobs but is unable to find any work and it is also used as a measurement of the health of the economy.  It occurs when a person is desperately looking for a job but is unable to find work, it is mostly used as a measure of the health of the economy. One of the most frequent measure of unemployment is the rate of unemployment which can be measured by calculating the ratio of number of unemployed people and the number of people in the labour force. The rate of unemployment in the United States in the year 2018 was known to be 4.0%. There were at least 160.4 million people in the US labour force in the year 2017. It is known to have the fourth largest labour force in the world. The private sector is known to have employed about 91% of working Americans. The rate of unemployment is 4.1% or 6.6 million people. There was a presence of Great Depression between 2009 to 2010 which resulted in the problem of jobless. The youth unemployment rate was known to be 18.5%. By the end of 2013 though the rate of unemployment known to have fallen below 8%, the record proportion of long-term unemployment remained indicative of a jobless recovery. The minimum wage of America is usually set by the US labour law and a range of sate and local laws. In the year 2009, the federal government has stated the nationwide minimum wage to be3 $7.25 per hour. According to the Bureau of Labour Statistics it was found out that the median wage for the workers in the United States was $857 per week in the year 2017.

Saving, Capital Formation, Financial Markets and Financial System

Source: Treasury.gov. (2018). Financial Markets of the United States. [online] Available at: https://www.treasury.gov/resource-center/faqs/Markets/Pages/finmarketsfaq.aspx [Accessed 20 Oct. 2018].

Summary; This part of the report states about the financial systems and the financial markets of the United States and the capital formation also.

Analysis: Savings is defined as the current income minus the spending on current needs. On the other hand, wealth is the value of assets minus the liabilities. Assets are termed as those value which one owns. The financial market consists of that part of the free market in the economic system where both people along with the entities can trade securities and also other goods and services at a very low cost of transaction which reflects demand and supply. The financial markets work on number of things which are significant in the workings of the market economy. The financial markets of the United States consist of many markets for the for the range of products which are offered on arrangement of trading platforms. The Fixed income securities, foreign exchange and equities along with other derivatives are traded in the financial markets. The office of the financial markets is also the office of the United States Federal government which is present in the United States Department of the Treasury. The banking system of the United State consist of the Commercial Banks, the Federal Reserve System and the credit unions. The financial system is controlled at both the federal and state levels. The Gross capital formation in the United States increased to 3322.33 USD Billion. The gross capital formation includes of outlays on additions to the fixed assets of the economy plus the net changes in the level of inventories. The capital formation of the United States recorded to be low of 1215.60 USD billion in the year 1995.

Short-term Economic Fluctuations and Aggregate Expenditure

Source: Stats.oecd.org. (2018). Economic Outlook No 102 - November 2017 : Output gaps: deviations of actual GDP from potential GDP as % of potential GDP. [online] Available at: https://stats.oecd.org/index.aspx?QueryId=51655 [Accessed 20 Oct. 2018]

Summary: The main points that will be discussed in this part re the economic fluctuations and the aggregate expenditure of the United States. It also states the result when the GDP increases over time. It also states about the recessions and expansions over time and the planned aggregate expenditure. this part of the report also states about the output gap.

Analysis: The Great Recession in the United States comprised of the financial crisis along with the recession. The output gap in economics examines the difference present in the actual output in the economy and the potential output. When there is an output gap which is negative, it means the actual economic output is much below the full capacity of the output. The output gap in the United States -3.76 percent of the potential GDP in the year 2009. The equation for aggregate expenditure is: AE = C + I + G + NX. The economy of the United States is therefore known to be highly developed mixed economy. The United States of America also is the world’s largest producer of both oil and the natural gas.

Conclusion

It can be concluded from the above report that Gross Domestic Product of the United States is around $52,444. The output gap is known to be -3.76 percent of the GDP. There is presence of short term economic fluctuations present in the U.S. There is also a presence of capital formation and the financial markets also consists of various markets. The rate of inflation of the United States is also known to be 2.9%.

Reference list

Data.bls.gov. (2018). Bureau of Labor Statistics Data. [online] Available at: https://data.bls.gov/timeseries/LNS14000000 [Accessed 20 Oct. 2018].

Data.worldbank.org. (2018). GDP (current US$) | Data. [online] Available at: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US [Accessed 20 Oct. 2018].

Fishlow, A., 2018. Latin America and the United States in a Changing World Economy. In Latin America in a New World (pp. 65-78). Routledge.

Geiger, T., 2018. Continuous national gross domestic product (GDP) time series for 195 countries: past observations (1850–2005) harmonized with future projections according to the Shared Socio-economic Pathways (2006–2100). Earth System Science Data, 10(2), pp.847-856.

Nová?ková, M. and Tol, R.S., 2018. Effects of sea level rise on economy of the United States. Journal of Environmental Economics and Policy, 7(1), pp.85-115.

Oladosu, G.A., Leiby, P.N., Bowman, D.C., Uría-Martínez, R. and Johnson, M.M., 2018. Impacts of oil price shocks on the United States economy: A meta-analysis of the oil price elasticity of GDP for net oil-importing economies. Energy Policy, 115, pp.523-544.

Saez, E., 2018. Striking it richer: The evolution of top incomes in the United States. In Inequality in the 21st Century (pp. 39-42). Routledge.

Stats.oecd.org. (2018). Economic Outlook No 102 - November 2017 : Output gaps: deviations of actual GDP from potential GDP as % of potential GDP. [online] Available at: https://stats.oecd.org/index.aspx?QueryId=51655 [Accessed 20 Oct. 2018].

Tradingeconomics.com. (2018). United States Inflation Rate | 1914-2018 | Data | Chart | Calendar. [online] Available at: https://tradingeconomics.com/united-states/inflation-cpi [Accessed 20 Oct. 2018].

Treasury.gov. (2018). Financial Markets of the United States. [online] Available at: https://www.treasury.gov/resource-center/faqs/Markets/Pages/finmarketsfaq.aspx [Accessed 20 Oct. 2018].