Macroeconomic Issues: Analysis Of The US Economy From 2004 To 2013

Macroeconomic performance

Describe about the macroeconomic issues with the help of some data available in the internet?

The macroeconomic policies are the primary source of any economy to decide the path of its development, but it is the most complex issue of the World. The policies taken by the policy makers vary from country to country. It causes the economy to fluctuate as par the recession or boom faced by the economy. The country I have chosen here is United States. I will explain how the economy has grown from the year of 2004 to year of 2013 so that the unemployment, poverty, inflation rate, stability in prices, economic growth got affected over the stipulated time period. I will discuss here the ups and downs face by the economy of United States so that it affects the economy’s performance of the country (Cavoli & Rajan, 2009).

Five type statistic like GDP constant price, GDP annual growth rate, real GDP per capital, unemployment rate and inflation rate to discuss the macroeconomic performance of the economy. The point to be noted is that the issue of migration is severe in that country. So the effect of this, along with the other variables also has to be taken into consideration while discussing the overall performance of the economy (Goh, 2004).

The United Stated economy has triggered the fast forward economic growth from the 2000s. The economy has now become the first and foremost destination of the jobseekers and businessmen. This is sometimes beneficial for the economy as it increases the GDP produced within the geographical area of the economy. The real growth rate has been severely increased from 2004 to 2013 due to this. But the government is also very much infrastructural development oriented so that the urbanization of the country causes to add to the real GDP more than ever within this stipulated time period. But migration has affected it negatively so that it causes the economy to suffer from unemployment (Hoogendoorn, 2012). The United States has one of the most diversified and most technologically advanced economies in the world. Finance, insurance, real estate, rental, leasing, health care, social assistance, professional, business and educational services account for more than 40 percent of GDP. Retail and wholesale trade creates another 12 percent of the wealth. The government related services fuel 13 percent of GDP. Utilities, transportation and warehousing and information account for 10 percent of the GDP. Manufacturing, mining, and construction constitute 17 percent of the output. Agriculture accounts for only 1.5 percent of the GDP, yet due to use of advance technologies, the United States is a net exporter of food.

The United Stated Economy

United States has mainly adopted an export oriented policy framework. It finances most of the foreign direct investment used in the economy. It causes to the economy to urbanize itself and it helps to make a significant status in the map of the world’s economy. United States has no natural resource. In spite of this, the development it achieved causes the economy to step forward to the industrialization to keep the pace of the growth unchanged. The strategies taken by the government of United States can be divided in three ways (Huff, 1994).

The strategic role of the government

An uninterrupted development of the infrastructure (‘Issue Information’, 2015)

The mobilization of human capital

The country taking these above three strategies together has confronted massive growth of development. In the previous period it used to earn the national income by using the semi-skilled labour force and the physical capital used to develop the infrastructure to make the country urbanized like the western countries. Now as time passes, the country emphasizes to develop a huge amount of infrastructural development so that the economies will try to make the workers highly skilled so that they can use them as another capital named human capital in their own industrialization process (Kang & Leong, 2012).

United States is the first choice now for the investors. They try to exploit the economy’s resources to develop their own business. This inflow of finance from the global investors also benefitted United States. Here the political dimension of the globalized economy has emerged. It needs the stabilization of the political environment of the economy which is highly noticed in United States. And no doubt, this is an added advantage for the economy to flourish further. The reason is quite obvious. It results in ample time to implement a policy and can give good observational period. If the political stability is not maintained over a country, the government will be changed frequently and it will cause to change the policies it would have taken as economic policies unfortunately varies over political ideologies. Now frequent change in policies cannot implement them properly within short time period. So, effects of the different kind of economic policies result in totally ambiguous policies. What we can observe in case of United States is its stable political situation has positively affected the economy towards development thus adding dollars to the gross domestic product of the economy (Lovelock, 2001).

Economy Strategy

As we have said above the economy is mostly export oriented. The major part of the Gross Domestic Product comes from the trading business it does with its partners internationally. The economy mostly exported electronics and chemical goods to the foreign countries. American economy has ample natural resources. It is mostly a natural resource abundant country. So no doubt it has a lot of opportunity to develop it makes difficult to the economy to suffer without water as it is also scarce in that country. So they buy it too.

The chart above shows the trend in GDP at constant prices of the US for the years 2004-2013. GDP at constant prices is calculated by the total expenditure of the goods and services within an economy for a specified period of time. The GDP of the US is recorded by the World Bank. In the year 2013, the GDP at constant prices was 15500.2 USD Billion and that in the year 2004 the GDP at constant prices was 13706.2 USD Billion of the US. The GDP at constant prices has increased over the years except for the year 2009 where it declined due to the global economic crisis.

What we can observe in the above diagram is that the economy has a consistent fall in the Gross Domestic Product Annual Growth Rate over the years. In the year of 2008, 2009 it was even negative. The reason is probably the severity of the recession experienced by the economy. We can better understand by a diagrammatic representation of the diagram. There is a huge fall in the GDP growth rate of the economy of US in the year of the 2009. If we minutely observe that even in the year of 2004 it had more growth rate than it achieved in the year of 2013. There was a consistent fall from the year 2004 to 2007. But after 2007 a sharp fall has been noticed. But here point to be noted that it is severely increased from 2009 to 2010.  But after that it has been slightly decreased in 2011. The reason may be the aftershock of the recession.

The GDP per capita is obtained by dividing the GDP with the population of the country which is adjusted by the inflation. The GDP per capita was recorded to be 45863.02 US dollars in the year 2013 in the US and it was recorded to be the highest. The graph below shows that the GDP per capita in the US has been increasing over the years except for the year 2010 which is mainly due to the global economic crisis. The chart below shows the trend in GDP per capita in the US for the years 2004-2013.

Production Output Performance Analysis

Now we discuss the unemployment rate of the United Stated economy from 2004 to 2013. Here point to be noted that United States itself is not a population abandoned country but as the economy grows, the migration from the other countries created a severe problem regarding employment in this country. The people migrated from other countries are obviously either job seekers or students. Now as United States majorly adopts a capital intensive production technique so that the people migrated here for seeking job are obviously skilled ones who make an added advantage to the human capital of United States. Now as the investors as well as the owner of the firms are not at all bothered about the economic situation, they are solely interested to their profit. And it is quite natural as they are not nonprofit organization, so they will hardly take care of the social impact of their activities as well as the macroeconomic consequences of the event.

So what we can observe in the above that the government of United States has taken proper policy so that the unemployment rate is getting decreased in the economy. It had been increased again in 2009 suddenly, but ultimately it has been controlled by the government.

Here point to be noted that though US is the tenth largest economy as per the per capita GDP growth rate of the economy, still, its unemployment rate is quite high in spite of being one of the most developed economies of the world. In the recession period there has been huge unemployment which is noticed during 2009-2010 (Stater & Wenger, 2015).

Now in United States it has been observed that the people migrated their get huge facilities to study over there too. So, from the growing stage of the human capital the natives are getting exploited. The capital intensive techniques demand more of skilled labour which they mostly higher from the migrated people. In case of unskilled labour demand the native people gets hired. On the other way, as the higher study is also easier for the migrated students, the native students remain unskilled and the salary structure in the firms demoralizes them further to make higher studies. So, the people of the country itself remain more unskilled so that they will make a smaller contribution to their own countries economic growth.

For the inflationary behaviour of the economy, first we explain the term inflation. Then follow by macroeconomic reasons behind the occurrence of it and macroeconomic consequences, how the economy of United States is getting affected, can be picturized (‘Referees for July 2012-June 2013’, 2013).

Labour Market Analysis

Inflation observed in any economy is majorly of two types- demand pull inflation and cost push inflation (Risa, n.d.).

Increase in price of the product due to increase in demand of that

If money supply M remains constant or increases smaller than that of price P,

M/P increases, which results inflation.

If population increases, it creates it creates excess demand which causes inflation (Sng, 2010)

Increase in price of the product due to increase in price of the factor inputs

If factor price increase, production cost will increase, thereby causing increase in the price level

An increase in wage-rate for either excess labour demand or the collective bargaining of the trade-union (Sng & Chia, 2010)

It mostly influences the economy as cost of consumption increases, the depreciation of capital goods of the economy began to increase, and this is the ultimate results of the inflation which affects the American economy as a whole.  What we can observe along the years in the US economy as par the inflation occurred there is represented tabular form in the following.

Here we majorly analyse the inflation with respect to the consumer price index. It majorly had been constructed considering the goods and services for the consumption of household. So the changes on those goods and services considered in that construction affect the purchasing power parity of the consumers of United States. Thus inflation makes people to feel poorer as the value of the income decreases thus affecting their welfare also (Sugimoto, 2011).

Here in the above diagram we can see that there are huge ups and downs of the inflation rate in the last few years. From the 2004 to 2008 the volatility was on an average consistent. Here point to be noted among the last few years i.e. within the year of 2004 to 2008, the maximum inflation has been observed in the year of 2008. It was 3.8 percent. But after that a sharp fall has been noticed. In 2009, there was economic recession observed in the economy. So what we can observe in the diagram is that there is a sharp fall in the inflation rate in that year. Not only that, it was negative during the recession period. Now the thing is that in the recession period the income of the people falls. So the demand for the goods and services falls. So, price falls due to the excess supply occurring in the economy, as the gap between the demand and supply decreases.

Conclusion

Here we have described the macroeconomic issues with the help of some data available in the internet. But here point to be noted that, it is an aggregate level analysis. So, if we consider the disaggregate level, we may see any other results. For example, the analysis regarding the level of unemployment is totally dependent upon the overall population of the economy which includes migrated people as well as natives. So, if it is tried to analyse them separately we may see the result other way, i.e., then the actual picture can be understood about the discrimination among the native people and the migrated ones. But in case of productivity analysis, it has been undoubtedly developed so much so that from travel and tourism department to the manufacturing industry it has been the foremost destination for all the job providers to job seekers, and even for the tourists and travellers (Underhill, 2009).