Question

In: Economics

Evaluate the health of the current U.S. economy by its GDP, business cycle, and economic growth.

Evaluate the health of the current U.S. economy by its GDP, business cycle, and economic growth.

Solutions

Expert Solution

The US GDP grew to the level of 20.5 Trillion in 2018 and it is expected to grow over $21 Trillion in 2019. Further, the GDP growth rate in the first quarter of 2019 is 3.2%, bettering the GDP growth rate of 2.2% in 4th quarter of 2018. It means the US economy is showing a positive growth rate of well over 2% in recent years. It shows that US economy is moving towards the expansion phase of the business cycle. It is also justified by the Federal Reserve increasing the federal fund rates (FFR) on a regular basis. It was kept to the level of 0%, but now it is 2.5%. It means that economy is growing with rise in purchasing power. As a result, price level is rising and to contain it within the target of 2% inflation, Fed is increasing the FFR. Besides, there is a decreasing trend of people claiming unemployment benefits with an unemployment rate of 3.6% as of April, 2019 in US economy. So, all the data mentioned, is reflecting a better state of health of the US economy and economy of USA is growing with optimism.


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