GDP of the United States - Assignment Example

Running head: Chamber Presentations Trends, forecasts, and statistics The United States economy is essential to the world economy. The latest report of the united states GDP was -3.2 percent from 1980- 2010. The average current account as a percent of GDP, for instance, was -2.67, thus hitting highest mark of 0.20 percent in 1981 and a lowest record of -6.0 percent of the December 2006. In this case, the United States economy records a strong current account where its GDP expands when boosted by exports revenue. As a result of this trend, usually, the exchange rates appreciate because investors begin to expect higher interest rates going forward. The United States economy, with regard to recent trends, therefore, should be going forward and getting better. However, the United States is trying to recover due to the fact that the trend is not going as expected, and the question of why America down remains to be answered (Cobb, 1995) is. As regards to above trends in the current account as a percent of united states GDP, of 1980-2010, it is clear that the GDP rates keeps fluctuating as it did in past recessions in the United States. According to the Bureau of Economic Analysis (BEA), the real gross GDP recorded an annual increase rate of 1.8 per cent in the third quarter of 2011 (News Release, 2011). This trend of increase from the second to the third quarter has been a notable release by the bureau of economic analysis. The second quarter of the year 2011 saw the real GDP increase by 1.3 per cent. How GDP is determined The gross domestic product refers to the output of goods and services that labor and property located in the United States produce (News Release, 2011). In the United States, the gross domestic product (GDP) growth rate is an essential component of the economy. For this case, the future of the economic activity is predicted by the yield curve slope and the spread between the interest terms (News Release, 2011). This is because the shifts of the slope are key determinants and indicators of high and low GDP growth. In determining GDP, there are three different approaches, which must carry out similar results. Therefore, the “total value of production”, the “total value of income” and the total value of expenditure should reflect equilibrium or simply be equal (News Release, 2011). The first method involves deriving a residual value and is referred to as the production approach (Krugman, 2001). Production approach involves taking an estimate of each industry’s gross output from other industries, and this is used to derive each industry’s residual value. The second approach is called the income approach which seeks to measure the income earned by various factors of production (The third method is the final expenditure approach that depends on annual spending across the economy (News Release, 2011). Therefore, its calculation is done using this formula; Gross Domestic Product = C (Consumption) plus I (Investment) plus G (Government production) plus X (Exports) minus I (Imports) (Krugman & Wells, 2009). Interpreting GDP The GDP estimate released at the end of year 2011 relied heavily on a more plausible data than the second estimate, which was released before the last report of the year. For instance, in the second estimate, the increase in real GDP was 2.0 per cent. There was an increase in real GDP in the third quarter which “primarily reflected positive contributions from nonresidential fixed investment, personal consumption expenditure”, among other parameters (News Release, 2011, p. 1). In this case, imports, which are a less parameter in the GDP tabulation, recorded an increase. The third quarter real GDP acceleration marks accelerations in the PCE and in nonresidential fixed investment. There was also a decrease in state and local government spending, which was surpassed partly by a significant drop of private inventory investment value. The final sales of computers increased by 0.22 percent, after adding 0.07 “percentage point to the third quarter change in real GDP” after subtracting 0.10 per cent point from the second-quarter change (News Release, 2011, p. 1). On the other hand, the gross domestic purchases had a sharp increase in the price index and this ensured prices paid by U.S residents by 2.0 per cent in the third quarter, 0.1 percent more than the second estimate. The real personal consumption saw an increase of 1.7 per cent in the 3rd quarter, and this was an improvement from an increase of 0.7 in the second. There are other GDP components that recorded an increase like; real nonresidential fixed investment, Real exports of goods and services, real federal government consumption expenditures and gross investment. With all these indications, the United States economy remains optimistic and thus should be investors. Reference Cobb, C. (1995).Ted Halstead and Jonathan Rowe. "If the GDP is up, why is America down?" The Atlantic Monthly, 276 (4), 59–78. Krugman, P. (2001). Development, Geography and Economic Theory. Cambridge: The MIT Press. Krugman, P. & Wells, R. (2009). Economics. New York: Macmillan News Release. (2011). Gross Domestic Product. (Dec. 22, 2011). Retrieved Jan.16, 2012, from http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm Read More