Detailed Analysis of the US Economy: GDP, Inflation, and Trends

This report provides a comprehensive analysis of the US economy, examining its historical GDP growth, cyclical patterns, and the impact of macroeconomic, political, and international events. It details the country's economic structure, including the dominance of the service sector, and compares its performance with other major economies like China and Japan. The report also explores notable business cycle periods, currency, consumer price index, and inflation trends, offering insights into the factors influencing economic fluctuations. Furthermore, it presents exchange rate data and references relevant scholarly sources to support its findings, providing a thorough overview of the US economic landscape and its key indicators.

Running head: ECONOMY OF AMERICA
ECONOMY OF AMERICA
Name of Student:
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ECONOMY OF AMERICA
• OUTLINE OF THE NATION’S GDP HISTORY
Year
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
-4
-3
-2
-1
0
1
2
3
4
5
6 USA GDP Growth Rate( %)
USA GDP Growth
Rate( %)
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.

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ECONOMY OF AMERICA
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

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ECONOMY OF AMERICA
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 world’s 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.

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ECONOMY OF AMERICA
 USA being world’s 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

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ECONOMY OF AMERICA
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 world’s 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.

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ECONOMY OF AMERICA
• 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 world’s 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 year’s 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.

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ECONOMY OF AMERICA
 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.

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ECONOMY OF AMERICA
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.