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Answer the following questions for the U.S. and Russia: Is the economy more capitalistic, more centrally...

Answer the following questions for the U.S. and Russia:

Is the economy more capitalistic, more centrally planned, or in between?

What have been the economic conditions in the last 5-20 years? What has been the inflation rate, unemployment rate, GDP growth rate?

Solutions

Expert Solution

The United States has a mixed economy. It works according to an economic system that features characteristics of both capitalism and socialism. A mixed economic system protects private property and allows a level of economic freedom in the use of capital, but also allows for governments to intervene in economic activities in order to achieve social aims and for the public good.

The U.S. government has always played a role in the economic affairs of the nation. Over the course of its history, many services began to come under the influence or direct control of the public sector. During some periods in U.S. history, however, it was closer to a true free market economy, in which the private sector, or individuals, is unfettered in its economic behavior, actions, and decisions.

Russia has a mixed economy. It's come a long way since the 1991 breakup of the Soviet Union and its command economy.

Today, the government only owns the oil and gas industries. Gazprom is Russia’s state-owned gas company and owns the world's largest gas reserves. But the reserves are declining and prices have fallen. The state owns 69 percent of Rosneft. British Petroleum owns 20 percent and the rest is publicly-traded. But Rosneft has severe financial problems. The other former state industries have been privatized.

The biggest drop in growth in U.S. history occurred in 1932. The economy contracted 12.9% during the worst year of the Great Depression. The worst deflation occurred that same year. Prices fell 10.3%. The highest jobless rate of 24.9% occurred in 1933.

All those records occurred during the contraction phase of the business cycle.

The worst inflation was right after World War II. Prices rose 18.1% in 1946. That happened during the expansion phase of the business cycle.

The chart below shows efforts to stimulate the economy or ward off inflation, whether by the Federal Reserve or by elected officials.

The US economy advanced an annualized 3.1 percent in the first quarter of 2019, slightly below earlier figures of a 3.2 percent expansion and in line with market expectations, the second estimate showed. It follows a 2.2 percent growth in the previous three-month period.

Personal consumption expenditure (PCE) contributed 0.9 percentage points to growth (0.82 percentage points in the advance estimate) and increased 1.3 percent (1.2 percent in the advance estimate). Spending rose more than expected for services (2.1 percent compared to 2 percent) and fell less than in the advance estimate for durable goods (-4.6 percent compared to -5.3 percent).


Fixed investment made a positive contribution of 0.18 percentage points compared to 0.27 percentage points in the advance estimate and went up 1.0 percent (1.5 percent in the advance estimate). Residential investment dropped more than expected (-3.5 percent compared to -2.8 percent) and investment for equipment fell (-1 percent compared to 0.2 percent). Also, investment rose less for intellectual property products (7.2 percent compared to 8.6 percent). Meanwhile, investment in instructures rose 1.7 percent compared to a 0.8 percent fall in the advance estimate.


The contribution from private inventories turned less positive than previously expected (0.60 percentage points compared to 0.65 percentage points in the advance estimate).


Exports jumped 4.8 percent (3.7 percent in the advance estimate), driven by sales of both goods (6.3 percent) and services (2 percent). On the other hand, imports decreased 2.5 percent (-3.7 percent in the advance estimate), as purchases of goods plunged (-3.1 percent) while imports of services went up (0.3 percent). As a result, the impact from trade was 0.96 percent, compared to 1.03 percent in the advance estimate.


Government spending and investment added 0.42 percentage points to growth, above 0.41 percentage points in the previous release. It went up 2.5 percent, higher than 2.4 percent in the advance estimate.

Russia unemployment rate fell to 4.5 percent in May 2019 from 4.7 percent in the previous month and below market consensus of 4.6 percent. It was the lowest jobless rate since September last year, as the number of unemployed declined 4.5 percent to 3.4 million Unemployment Rate in Russia averaged 7.49 percent from 1992 until 2019, reaching an all time high of 14.10 percent in February of 1999 and a record low of 4.50 percent in September of 2018.

Russia unemployment rate fell to 4.5 percent in May 2019 from 4.7 percent in the previous month and below market consensus of 4.6 percent. It was the lowest jobless rate since September last year.

The number of unemployed dropped by 152 thousand to 3.402 million in May from 3.554 in the previous month. Compared with the previous year, unemployment decreased by 206 thousand from 3.608 million.


Meantime, registered unemployment came in at 0.776 million, lower than April's 0.817 million but slightly above last year's 0.730 million.


Russia’s real wages increased 2.8 percent from the previous year in May 2019, slowing from an upwardly revised 3.1 percent in the previous month but beating market expectations of a 1.5 percent rise. Average nominal wages advanced 8.1 percent to RUB 48,510.


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