Magic of Reckless Policies - Essay Example

In the last quarter of 2011, the GDP growth rate stood at 3 percent (BEA). In 2011, the GDP at current prices amounted to $15.094 billion or $13.315,1 at the 2005 prices (BEA). In 2010, the GDP at 2005 prices amounted to $13.088 billion. In 2011, it was the durable goods manufacturing that led the growth (BEA). Manufacturing value increased by 11.2 percent in 2010, and then again by 7.9 percent in 2011 (BEA). In comparison to durable goods, the services producing sector grew by 3 percent in 2010, and only 1.

6 percent in 2011 (BEA). However, consumers suffered in 2012 from increased inflation and in turn decreased consumption of durables. An average person in the US benefitted from the positive GDP growth. In March of 2012, the real disposable personal income increased by 0.4 percent (BEA). The growth rate in the last quarter of 2011 was 1.7 percent (BEA). The cause of this decrease has been attributed to a rise in consumer prices in 2012 from 1.2 percent increase in 2011, to an additional 2.4 percent increase in 2012 (BEA).

Real consumer spending, i.e. consumer spending adjusted for an increase in prices, increased 0.5 percent in February and then 0.1 percent in March (BEA). BEA attributes this decrease in the growth rate to a decrease in durable goods spending such as motor vehicles and parts (BEA). Since manufacturing of durables drove the GDP growth rates in 2010 and 2011, a decrease in demand led to a decrease in supply and thus GDP in March 2012. On the other hand, the US current account deficit increased by 2011.

The current account deficit stood at $470.9 billion in 2010 and $473.4 billion in 2011 (BEA). The current account deficit in BEA National Economic Accounts is defined as: “the combined balances on trade in goods and services, income, and net unilateral current transfers.” The deficit amounted to 3.2 percent of GDP in 2010 and 3.1 percent in 2011. When dissected, the deficit on international trade in goods increased in 2011 to $738.3 billion from $645.9 billion in 2010. However, there was a surplus on international trade in services, which increased to $178.

3 billion in 2011, from $145.8 billion in 2010 (BEA). Income payments too were in surplus in 2011. Net financial inflows increased in 2011 from 2010. Whereas they amounted to $254.3 billion in 2010, they increased to $394.1 billion in 2011 (BEA). Unilateral transfers decreased in 2011. In February 2012, the deficit on international trade in goods and services amounted to $46 billion, which is a decrease from $52.5 billion in January 2012 (BEA). It is expected that the current deficit will decrease in 2012 if the trade deficit keeps on decreasing and other variables remain moving as in 2011.

Unemployment rate decreased in 2012. In March 2012, the unemployment rate stood at 8.2 percent in comparison to 8.9 percent in 2011 (Bureau of Labor Statistics [BLS]). When comparing to the start of the financial crisis in 2007, it can be seen that by 2010, unemployment reached it peek. In 2007, the unemployment rate stood at 4.6 percent. By 2010, the unemployment rate increased to 9.6 percent and has been decreasing since then (BLS). Unemployment has been decreasing in Ohio as well. In February 2012, the unemployment rate stood at 7.

6 percent and then decreased by one percentage point by March 2012 (Johnson). In March of 2011, the unemployment rate stood at 8.8 percent (Johnson). Daily Treasury interest rates have decreased since 2011. The interest rate on a one month