Real GDP for 2004 and 2005 - Essay Example

4 February 2007 Economics Calculate real GDP for 2004 and 2005 using 2004 prices. By what percent did real GDP grow real GDP in 2004 = Prices in 2004 * Quantity of Products Manufactured = (100) ($20) + (200) (110) = $2,000 + $22,000 = $24, 000Real GDP in 2005 = Prices in 2004 * Quantity of Products Manufactured = (120) ($20) + (210) (110) = $2,400 + $23,100 = $25,500Real GDP Growth Rate = (Real GDP in 2005 - Real GDP in 2004) / Real GDP in 2004 = ($25,500 - $24,000)/$24000 = 6.25% 2. Calculate the value of the price index for GDP for 2005 using 2004 as the base year.

By what percent did prices increase nominal GDP in 2005 = Prices in 2005*Quantity of Products Manufactured = (120) ($22) + (210) ($120) = $2,640 + $25,200 = $27,840GDP Deflator = (Nominal GDP in 2005/ Real GDP in 2005)*100 = ($27,840/$25,500)*100 = 109.173. Now calculate real GDP for 2004 and 2005 using 2005 prices. By what percent did real GDP grow real GDP for 2004 using 2005 prices = Prices in 2005*Quantity of Products Manufactured in 2004 = (100) ($22) + (200) ($120) =$2,200 + $24,000 = $26,200Real GDP Growth = (Real GDP in 2005 - Real GDP in 2004) (Real GDP in 2004) = ($27, 840 - $26, 200) ($26,200) = 6.25%4. Review the GDP information for the past few years from the Bureau of Economic Analysis's Website.

Provide a brief summary of the GDP trends over that timeframe and discuss two or three events that may have caused these trends. This paper looks at the GDP growth in the United States from 2000-2006. As the economy of the country is a relatively more mature one, it grows slower than other rapidly industrializing economies like China. During 2000, the economy posted a robust GDP annual growth of 3.7%. However, the economy entered into a period of recession in 2001 which can be largely attributed to the 9-11 terrorist attacks.

This event has crippled the economy, leading to a quarterly decline of 1.4% in the third quarter. The attack has "shut down the economy for several days and has had a lasting impact on tourism, the airline industry, and other businesses" (Economists Call it Recession 2001). On an annual basis, the US economy only managed to grow by 0.8% during 2001. The economy entered a moderate state of recovery in 2002 where it posted 1.6% annual GDP growth. Recognizing the slowdown in the economy, the Bush Administration planned to stimulate consumer spending and investment through the use of tax cuts.

This fiscal policy was implemented in July 2003, taking immediate effect in the next quarter. The US has enjoyed an annual growth rate of 2.5% during that year which is strongly fueled by the rise in personal consumption expenditures coupled with a higher level of government spending. Also, the tax cut has been effective in creating jobs and boosting business growth. Since 2004, the US economy has been posting growth at par with its pre-recession rates. GDP in 2004 rose by 3.9%, which was 0.2% higher than the 2000 level.

Annual growth rates in 2005 and 2006 are 3.2% and 3.4%, respectively.