Macroeconomic Condition of the USA in 1996-1999 - Essay Example

No Number One Macroeconomic Condition of the USA in 1996-1999 1996 was an outstanding year for the United States economy with stable economic growth rates being experienced. There was a period of low unemployment, low inflation, and the GDP kept growing substantially faster than in 1995 (Iceland, pp. 12-57). Sources :( United Nations, and United Nations, pp.33-38). In 1997, the economy experienced a moderately low growth rate with low employment and inflation rates. The real GDP had fallen from 2.5% in the year 1996 to 2.2% in 1997. Consequently, the GDP would increase by 2.3% in 1998 and then fall to 2.0% in 1999. Source: author In 1996, the unemployment leveled to the lowest level in 23 years with economists terming the economy as job-creating machinery. It was a 2.1 increase from that of 1995, at the same time interest rates were low. The unemployment levels were as shown below in the period. The business cycle from the year 1996-1999 Source :( United States Unemployment Rate, p.1) In the year 1998 the economy experienced some of the best macroeconomic results that policymakers there were a tremendous outburst of volatility in the asset market. Although the GDP was above average in the year 1998, there was a consistent decline in growth. The economic condition worsened in 1990 making the economy more adverse (Iceland, pp. 12-57). Number Two. The curve indicates the correlation between the quantity of real GDP and price level required by household. In the long run, the average demand curve and short run average curves intersect at a point on the long term average supply curve. Aggregate Demand - Aggregate Supply model Source: Author 1. There was a large exogenous decrease in Aggregate Demand. 1. There was a large exogenous decrease in Aggregate Demand. In the presence of contraction policies the aggregate demand curve shifts to the left leading to a reduction in aggregate demand. In this case, price levels will fall but the output is not affected. On the other hand, if it were in the short run both output and price would drop. Source: Author Graph showing how contraction policies lead to a decrease in demand. 2. There was a large exogenous decrease in Long-Run Aggregate Supply. The aggregate supply shows how much is provided by a firm and at what price. In the long run, the curve is affected by events that lead to a change in the potential output of the economy. The term aggregate supply refers to the total value of services and goods that a country’s firms produce over a period. In case of a decrease in the long run supply curve, there will be a drop in the price level and an increase in the GDP. 3. Both (A) and (B) were to occur simultaneously. If both the decrease in supply and consequently a decline in demand the market would destabilize and the GDP growth would remain at the same level Number Three Nigeria economy The health of the economy is by three economic indicators that include the gross domestic product, consumer price index and unemployment levels. For the economy to be termed as healthy there is a certain baseline that should be met. For a well-performing economy, the GDP should be growing at a rate of 2-3 % per annum reflecting a real growth pattern. An increase in any rate above 3% is possible but might be due to stepping on employee and environmental rights. Nigeria’s GDP is growing at a rate of 7% indicating that it has a healthy growth. Inflation rates are through the study of consumer price index. Inflation rates should be above the GDP so as to give the consumer an incentive to buy goods for the future. The inflation rate in Nigeria is at 8.3% having gone down from that of 2013 which was 8.5%. The rate is a good indicator of growth because consumer spending is the largest chunk of the GDP components. The Nigerian economy unemployment rates stands at a rate of 23.9%. Unemployment rates should rise at 4-6% to a healthy economy. Rates higher than this indicate that the economy is not creating enough jobs for the population, and the appropriate policies have to be put into to decrease the rates. An overall look at the Nigerian economy indicates that there will be a continued growth. The growth is driven by investments in telecommunications, agriculture and services (Afolabi et al, pp. 1-22). Many issues hinder development in Nigeria making it be termed as a rich country of poor people. Corruption and obstacles to business creation are bearing the most blame for the poverty. The government should work to support private business investments in the region Number Four The Employment Situation April 2015 The unemployment rates have continually decreased from April 2013 from a high of above 7%. The current rate stands at 5.4% that is very encouraging for the US economy. A lower unemployment rate proves that the economy is working at absorbing more people. It is an improvement from the unemployment levels of 2009 which stood at 9.3%. The economy has consistently recovered with the rates falling yearly to stand at 5.4% in 2015. The rate is a record lowest from that of 1950 which was at 2.5% (Blanch flower, pp. 1-25). United States citizens are hopeful that the performance of the United States economy will improve. Participation in the labor force remains the lowest since the late 1970s. Since 2009, 6 million people have been absorbed into the workforce. However, the economy still needs to employ a further 7 million worker. Recovery from the downturn remains years away if the current rates of employment growth persist. It is that the economy will need another five years to recover fully. At the end of the recession, about 11 million jobs were necessary to restore the economy to full growth. The economy’s most notable flaw is the unemployment of the people in prime ages that is those citizens between 25-54 years. The US economy is still depressed and is operating below it potential. Faster growth of the economy is needed to realize full economic potential and employment. There is also the question of inflation pressure that is conspicuously missing. Inflation pressure is required to keep the consumption high so as to increase the GDP. Years after the recession the economy still hasn’t recovered. Unless Congress makes changes and reverses the course of the economy, the economy won’t meet its potential (Blanch flower, pp. 1-25). Number Six Causes of the Recession of 2008 In 2008, the US economy experienced a state of recession mainly due to factors preceding the year. Economists explained the recession in terms of two main causes, the first being the collapse of the real estate market. It was after the housing market prices had burst in 2007. There was also a crisis of the financial systems. The systems had benefited from the economic bubble provided by the housing market. Between the periods of 2007-2009, there was a series of banking failures that resulted in a prolonged recession. The government intervention at that moment did very little to restore the economic growth but rectifies the failures in the banking system (Sum, pp. 4-24). Recovery has been modest over the years with the current economic situation having improved. The first quarter of 2015 saw an increase in the GDP by an estimated rate of 0.7%. Although this is a decrease from the fourth quarter of 2014, it is an improvement and recovery from the GDP of the year 2009. Source :( Real U.S. GDP, p. 1) The labor sector looks promising having added a total of 146 000 jobs Source : (GDP and the Labor Market, p. 1) The real GDP is also increasing consistently since the year 2008 showing recovery. The government hopes to increase the interest rates this year prospecting that there will be a growth in the dollar throughout 2015 (Sum, pp. 4-24). Number Ten. Aggressive macroeconomic policies may be put into to enable the growth of the economy at a higher rate. During recessions, the United States central bank plays a vital role in macroeconomic policy. It is mandated with the task of promoting maximum employment and stabilization of prices. The monetary policy tools mostly used include lowering of short-term interest rates that attempts to return the economy to a state of full employment. The agency may pursue other unconventional policies such as the large-scale purchase of assets. It is a form of quantitative easing and forward guidance approach that stimulates the economy using other channels. By the using of aggressive macroeconomic policies, the government hopes to achieve the following factors. Full employment, economic growth, control of inflation, and a satisfactory balance of payments in the country. The policy instruments include fiscal policy, monetary policies and supply-side policies (Reich et al, pp. 20-50). Congress needs to address the damage done to the economy in the year 2009. The fiscal policymakers have gone down the wrong path of fiscal austerity. The policies have slowed the economic growth and adopted political intransigence destroying any plans to heal the economy. Congress has failed to renew the emergency unemployment benefits that had expired months ago. There has been a mix of budgetary blunders by Congress and a state of no action, with blame lying on them. Unless Congress is to reverse the course of the economy and boost its activity, and then there might be another recession (Reich et al, pp. 20-50). Works Cited Afolabi, Babatunde, and Chris Ehinomen. "Rising Youth Unemployment and its Social Economic Implications for the Growth and Development of the Nigerian Economy." Available at SSRN (2015). Blanch flower, David G., and Andrew T. Levin. Labor Market Slack and Monetary Policy. No. w21094. National Bureau of Economic Research, 2015. "GDP and the Labour Market - Q1 2015 Quarterly Update." - ONS. Web. 5 June 2015. < http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2015--quarterly-update/sum-q1-2015.html > Iceland, John. "Dynamics of Economic Well-Being: Poverty 1996-1999. Current Population Reports." (2003). Real U.S. GDP. Talk Radio News Service. 30 Jan. 2015. Web. 5 June 2015. . Reich, Rob, et al. "Human Capital & Economic Policy." agenda (2015). Sum, Andrew. "The “Jobless and Wageless” Recovery from the Great Recession of 2007-2009: The Magnitude and Sources of Economic Growth through 2011 and their Impacts on Workers, Profits, and Stock Values." EPRN (2015). United Nations. and United Nations. Economic and Social Survey of Asia and the Pacific 2000. New York: United Nations, 2000. Print. United States Unemployment Rate. Info please, 1st Dec.2013.5 June 2015 < http://www.infoplease.com/ipa/A0104719.html> Read More