The US Economy: 2007

According to N. Gregory Mankiw’s textbook, Macroeconomics is the study of economy-wide phenomena, including inflation, unemployment, and economic growth (Mankiw, 2007). In the billions of Macroeconomics classes across the world, we study these god-like wonders and how they affect our economies. With graphs more fun than fifteen roller coasters combined, data sought after more than the meaning of life, and articles from real economists, I’ve come up with some conclusions about the state of the U.S. economy. The growth rate of GDP is slightly above average, and the inflation and unemployment rates are both slightly below average. To the untrained eye, one might think we’re doing poorly with the second two areas being below average, but in this case it is actually a good thing to be an underachiever. All three areas of Macroeconomic phenomenon are slightly better than the average of the past twenty years. In my analysis of GDP, inflation, and unemployment, I can confidently say that the American economy is running slightly well.

Gross Domestic Product is about the value of goods and services of each year. A more exact definition of GDP is the market value of all final goods and services produced within a country in a given period of time (Mankiw, 2007). What that means is GDP is the nation’s total income for that year or quarter. “GDP measures the value of all goods and services produced within the United States and is considered the best barometer of the country’s economic fitness” (Business Week). This is because a higher income in a country will give its citizens a higher standard of living. Since we always want what is best for others, an increase in economic growth is important, so GDP therefore has to go up each year.

Over the past 20 years, Americans have enjoyed a steady level of economic growth and the past year is no different. Thanks to the help of the Bureau of Economic Analysis’s website, I found that GDP has increased at an average rate of 2.98% over the past 20 years (BEA, 2007). The current average increase in GDP from 2006 to the first three quarters of 2007 is 0.2 percentage points higher at a grand total of 3.1%, the previous increase of 2006 being 2.9% (BEA, 2007). That 3.1% change is very good compared to the past twenty years. As shown by the graph below, the highest increase in GDP was 4.5% in 1999 and the lowest was -0.17% in 1991, so a 3.1% increase is actually pretty good (BEA, 2007). We are closer to the highest increase than the lowest increase. As shown by the graph below, there have been many different increases and decreases in GDP from 1987 to 2006 (BEA, 2007). For example, 2001 was the year that the Terrorists attacked the World Trade Center. Big things like that tend to affect GDP in different ways.