Question

This table shows U.S. economic indicators for a five-year period. All variables are measured in percent.

U.S. Economic Indicators for a Five Year Period

GDP Growth	Inflation	Unemployment
2.5	2.1	5.6
3.7	1.9	5.4
4.5	1.8	4.9
4.4	1.1	4.5
4.8	1.5	4.2

How would you characterize the state of the economy over this time period and especially in the final year shown? What do you expect will happen in subsequent years? Please explain your reasoning in detail.

Grading Rubric

Criteria	Not Evident 0%	Developing 55%	Proficient 80%	Distinguished 100%	Weight
Assess the state of the economy based on the data for the GDP Growth indicator					25
Assess the state of the economy based on the data for the Inflation indicator					25
Assess the state of the economy based on the data for the Unemployment indicator					25
Predict what will happen in subsequent years based on the data for all three indicators					15
Articulation of response (citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas.)					10
				Total:	100%

Answer 1

GDP growth (A)	Inflation (B)	Unemployment ( C)	RGDP (D)
2.5	2.1	5.6	0.4
3.7	1.9	5.4	1.8
4.5	1.8	4.9	2.7
4.4	1.1	4.5	3.3
4.8	1.5	4.2	3.3

To analyze the performance (health and growth) of an economy and to make assumptions about the future of an economy, we need to analyze of some of the most important indicators of the economy. The first indicator is Gross Domestic Product the positive rate of growth reflects an increment in the production of goods and services in the economy. In the first year period, Gross Domestic Product (GDP) is increasing and in the 4^th year, it had to decreasing a little bit but rose in the next year, (5th year). Now, inflation has been falling continuously and in the 5^th year it increasing a little bit from the previous year (4^th year). And unemployment has also been decreasing. So analyzing only Nominal GDP growth will provide a misleading picture. GDP growth adjusted for inflation rate gives us the Real GDP growth given in column (D) (where (D) = (A) – (B)).So the economy has overall growth with lower unemployment. This is good but this relation will break when unemployment becomes very low because aggregate demand will increase and prices will rise. This is what happened in the final year. GDP increased from 4.4 to 4.8 percent and unemployment fell to 4.2 from 4.5, prices rose and inflation increased to 1.5 from 1.1. In subsequent years US GDP will slow to 2.1%in 2019 and in 2020 it will fall to 2% and in 2021 it will fall to 1.8%The unemployment rate will be 3.6 % in 2019, 3.7 % in 2020, and 3.8 in 2021.The inflation will be 1.5 in 2019, it will be 1.9in 2020and 2 .0 %in 2021.So GDP will fall, unemployment will increase and inflation will increase. So 2019 will have subdued economic growth though the recession will not be there.