Optimism in the Long Run
explanatory Essay
1998 words
The Wall Street Journal (2014) published an article on January 30th, 2014 discussing the macroeconomic factors that reflect a growing U.S. economy. Some of the key macroeconomic indices discussed include:
1. Gross Domestic Product (GDP)
2. Inflation
3. Trade Deficit.
Within these macroeconomic indices lie several of the top ten general economic principles to include:
1. People respond to incentives
2. Trade can make everyone better off
3. A country’s standard of living depends on its ability to produce goods and services
4. Prices rise when the government prints too much money
5. Markets are usually a good way to organize economic activity
U.S. GDP grew at an annual rate of 3.2% (seasonally adjusted) in the last quarter of 2013. Inflation rose at an annualized rate of 0.7%. U.S. trade exports improved significantly in the last quarter of 2013, the most in over three years. However, concerns over the turmoil in some emerging market economies might hamper our continued economic recovery. Despite emerging market concerns, the Federal Reserve has confidence in the strength of our economy. As a result, they recently announced a tapering of their current monetary policy. However, the Fed is also promising to keep interest rates low for now until our economy’s unemployment figures improve.
In the following sections, I will discuss each macroeconomic indices presented in the article, their overall relationship to the article and how they impact one another.
GROSS DOMESTIC PRODUCT
Thought to be the best single measure of a society’s well-being, gross domestic product (GDP) is the market value of all final goods and services produced within a country in a given period of time (Mankiw, 2012). The GDP indices published for Q4 2013 refl...
... middle of paper ...
...bor Statistics. (2014). Consumer price index: frequently asked questions. Retrieved from http://www.bls.gov/cpi/cpifaq.htm
CNN Money. (2014). Fed continues taper as Bernanke's term ends. Retrieved from http://money.cnn.com/2014/01/29/news/economy/federal-reserve-taper/
The Economist. (2014). Star spangled spenders. Retrieved from http://www.economist.com/news/united-states/21592643-americans-cool-imports-current-account-deficit-shrinks-star-spangled-spenders
Mankiw, N.G. (2012). Principles of Macroeconomics (6th ed.). Mason, OH: South-Western, Cengage Learning
U.S. Department of Commerce (2014). Annual trade highlights. Retrieved from http://www.census.gov/foreign-trade/statistics/highlights/annual.html
Wall Street Journal. (2014). U.S. Economy showing signs of gearing up. Retrieved from http://online.wsj.com/news/articles/SB10001424052702304428004579352472437635350
In this essay, the author
- Explains that the wall street journal (2014) published an article discussing macroeconomic factors that reflect a growing u.s. economy.
- Explains that within these macroeconomic indices lie several of the top ten general economic principles.
- Explains that gross domestic product (gdp) is the market value of all final goods and services produced within a country. the gdp indices published for q4 2013 reflects the percent change in total expenditure on the economy’s output.
- Explains investment – spending on new capital equipment, inventories and structures used to produce other goods, as well as, purchase of new housing.
- Explains that government purchases are spending on goods and services by governments, including local, state and federal.
- Explains net exports are domestically produced goods purchased by foreigners, whereas imported goods are produced abroad.
- Explains that the quantitative easing program spends $65b a month on the purchase of u.s. government bonds from banks.
- Analyzes how quantitative easing increases banks' supply of loanable funds and the money multiplier effect.
- Explains that an economy's inflation rate is determined using either the gdp deflator or, in most cases, the consumer price index (cpi).
- Explains that a typical basket of goods and services includes housing, transportation, food & beverages, education, communication, medical care, recreation, apparel, and other miscellaneous goods.
- Explains that the basket determines the prices of goods and services at determined points in time.
- Explains that cpi uses a base year to compare one period to another.
- Explains that trade is becoming a reliable source of economic growth. u.s. exports rose 11.4% in qtr4, the most in three years.
- Explains that markets are a good way to organize economic activity. lower interest rates increase the demand for money, while inflation adjusts to bring money supply and demand into equilibrium.
- Explains the bureau of economic analysis's gross domestic product, 4th quarter and annual 2013 (advance estimate).
- Explains that u.s. gdp grew at an annual rate of 3.2% (seasonally adjusted) in the last quarter of 2013.
- Explains that gdp is expressed as "real gdp", by fixing price levels when comparing one period to another.
- Explains that inflation increases when the government prints too much money. the quantity theory of money states that growth in quantity is the primary cause of inflation.
- Explains that a higher discount rate discourages banks from borrowing and decreases the money supply. inflation is only real concern when wages do not keep pace with rising inflation.
- Explains that a surge in domestically produced oil reduces our need for importing oil, and increases our amount for export.
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