• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Economic Growth in the United States.

Extracts from this document...

Introduction

Kimberly Morgan December 5, 2003 Economic 104 Dr. Meyers Economic Growth in the United States During Bush's first year as president, real Gross Domestic Product (GDP) grew very slowly in the second half of 2000 and the first half of 2001, and then actually declined in the second half of 2001. (Baumol) In the year 2001, the United States realized that we were experiencing a recession. A recession is a period of time during which production falls and people lose jobs. (Baumol) Over the pass four years, our economy has been moving very slow. Many people are losing jobs, and the GDP has fallen. Below is a graph of a recession: "The tax cut of 2001 turned out to be remarkably well timed, however, and the war on terrorism led to a burst of government spending. Both of these policies helped shift the aggregated demand curve outward, mitigating the recession." ...read more.

Middle

(Christie) This is good news, especially since cyclical unemployment (The portion of unemployment that is attributable to a decline in the economy's total production.) rose due the to recession. (Baumol) This is a sign that prosperity is being restored. The ideal situation would be the have full employment. Full employment is a situation in which everyone who is willing and able to work can find a job. At full employment, the measured unemployment rate is still positive. (Baumol) At full employment we are at our potential GDP, which means that output is at the highest level possible. Because our equilibrium level of real GDP fell short of our potential GDP we had a recessionary gap. Below is a graph of a recessionary gap: Also the FED found that the "regional manufacturing index soared to a nine-year high in November." (Christie) This is especially important because the manufacturing sector was the hardest-hit part of the economy during the recession. ...read more.

Conclusion

(Christie) This means that the Consumption Function Curve shifted inward. William J. Baumol, one of the authors of Macroeconomics: Principles and Policy, states that Consumer Wealth, the Price level, the Real Interest Rate, and Future Income Expectations can cause the consumption function curve to shift. I believe the reason that consumption function shifted inward during the recession is because the price level increased and therefore "eroded the purchasing power of consumer wealth." (Baumol) Because the economy was slow, prices went up to compensate. The public then stopped spending and began to save because they realized the economy was bad. This would fall under the category of future income expectations. Below is a graph of shifts of the consumption function. In conclusion, the article Positive Economic Data Rain Down contains data that shows that the United States is coming out of its economic recession. Which is good news for the GDP and employment. No the United States is not inferior to recessions, but we know that we can over come a recession. Word Count: 810 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. The Nature of Macroeconomics

    s economic behaviour --> prices in product and factor markets � * Increasing consumption due to changes in consumption patterns (less saving at any level of Y) * Monetary problems - too much money/credit in economy --> r v-->. AD � --> prices � Cost Inflation * Any input that

  2. Retailing In India - A Government Policy Perspective

    This effect has been observed in the Chinese market. What this growth would imply is that there would be space for both the current players as well as the foreign retailers in the new market place. Greater Productivity: A combination of competition, industry status, better skills, greater scale, modern technology

  1. Split Votes: A Nation Divided on the Marijuana/Drug Legalization Debate

    the growth, distribution and use of marijuana through a rational system of regulation and taxation, thereby separating the market for marijuana from the market for 'hard' drugs like crack, cocaine, amphetamines and heroin" (MRP). This argument uses the same goals as many prohibitionists.

  2. Briefly explain why initial levels of GDP might influence subsequent economic growth.

    GDP per capita could be taken as a measure of a country's productivity although it is more appropriate to express it in per worker terms Economic growth is related to shifts in the aggregate supply of the economy and therefore related to the growth of potential output.

  1. A Report on US Japanese Economic Crisis - 2001.

    The USA started the year 2001 with a huge trade deficit. Also increase in the price of oil in the preceding periods is thought by many as one of the factors for triggering the slide. Increase in the price of oil ate away a proportion of the sales proceeds of

  2. What is macroeconomics?

    * Interest rates effect consumption = repayments on borrowed funds increase and opportunity cost of expenditure on consumer items increases (spend or save) * Fiscal policy = affects disposable income through taxes and level of government spending on goods & services * Monetary policy = affects interest rates --> cost

  1. The following report discusses the possibility of McGregor BFA opening an office in London ...

    There are significant reasons that led us to the decision that London presents the business with the best possible opportunities for future expansion. According to London First Centre, The Inward Investment Agency for London (December 2003), London is Europe's leading financial centre and is one of the top three centres in the world alongside Tokyo and New York.

  2. The Ohio Pilot Scholarship Program

    What exists is a "nonmarket" in which the normal roles are unfilled and from which only the unions benefit from competition's exclusion. It is not surprising then that the union-dominated public education industry is so opposed to real school choice and so liberal in general.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work