Question

Describe the state of the U.S. Economy for the years between 2006 and now in terms of macroeconomic measures discussed in the course (GDP, unemployment, and inflation rates).

Answer 1

The year 2006 in the economy of USA is characterized by booming real estate market, initiation of subprime lending and availability of the cheap loans. It is showed by the inflation rate of 3.2% that shows that there was ugly buying habits in the economy. The unemployment rate in the economy was 4.6% in 2006 that is slightly above the natural rate of unemployment of 4%. At this level of unemployment the GDP was $13856 Billion averaging a positive GDP growth rate. It was the period when banking institutions took moral hazard in the name of deregulation and it further spread the irregularities and it culminated in the form of real estate bust and financial meltdown of the economy. It happened in 2008 and peaked in 2009. economy went into the recession. It caused the unemployment level to rise and it peaked at 10% in the October, 2009. It showed the negative impact on GDP and GDP growth rate was -2.8% in 2009. Inflation rate became negative and came down to be -.4%.

It led the Federal Reserve and the Federal government to come together and formed a proactive monetary policy led by the Federal Reserve and a $787 billion stimulus package as a fiscal policy by the government. As a part of the monetary policy, the Federal Reserve reduced the federal fund rates up to 0%, increase the money supply by buying back government securities and encouraged banks to reduce the lending rates. After few years of continuous effort as a part of monetary policy and fiscal policy, the economy came out of the recession. This is vindicated by the unemployment level of 4% approx., GDP growth rate of 2.9% as in the first quarter of 2018. Size of the GDP is over $19400 Billion and the inflation rate of nearly 2%. Besides, the unemployment benefits claims are coming down on a regular basis. The Federal Reserve has increased the Federal fund rate to be in the region of 1.5%. It shows that the US economy has come a full circle and started growing again. This time, the growth is based upon the sound economic policies, proactive Federal Reserve and strong investor confidence.

References:

1. Gross domestic product (GDP) of the United States from 1990 to 2017 (in billion current U.S. dollars). Retrieved from: https://www.statista.com/statistics/188105/annual-gdp-of-the-united-states-since-1990/
2. Unemployment rate in the United States from 1990 to 2017. Retrieved from: https://www.statista.com/statistics/193290/unemployment-rate-in-the-usa-since-1990/
3. Annual inflation rate in the United States from 1990 to 2017. Retrieved from: https://www.statista.com/statistics/191077/inflation-rate-in-the-usa-since-1990/