Question

Discussion Question Part 1: "GDP Data Analysis"

Locate current data for GDP for the U.S.:

1. Go to the Bureau of Economic Analysis Web site.
2. Click the rightmost tab, “Interactive Data.”
3. Click “GDP & Personal Income” under “National Data”
4. Click the button that says “Begin using the data”
5. Click on “Section 1 – Domestic Product and Income” to expand the selection.
6. Select Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product
7. In the upper right corner of the frame, click on the arrow that says “MODIFY.” Change the SERIES option to ANNUAL and adjust the FIRST YEAR and LAST YEAR options to reflect data from the past ten years. Click “REFRESH TABLE” to generate the data.

What are the annual growth rates for the U.S. economy over the last 5 – 10 years? Has GDP been growing or declining over this time-frame? Explain what factors might have caused GP to increase or decrease over this time-frame.

Next, what are the quarterly growth rates (annualized) for the U.S. economy for the last six quarters? What trends do you notice in these numbers? Does anything surprise you? Comment on GDP growth for the different components of GDP (C, I, G, and Xn) over this time frame?

Website: www.bea.gov (Links to an external site.)

https://www.npr.org/templates/story/story.php?storyId=127586501

Discussion Question Part 2: "GDP and Economic Well-being"

Then read the following articles and answer these questions:

• Is GDP a good measure of economic well-being?
• Why, why not?
• What are its limitations?
• What are some factors that would lead to higher GDP in the U.S. but do not improve well-being?

Website Articles

The Economist Measuring What Matters (Links to an external site.)

https://www.economist.com/finance-and-economics/2009/09/17/measuring-what-matters?story_id=14447939

The Donella Meadows Archive Why Should We Be Glad when the GNP Goes Up? (Links to an external site.)

http://donellameadows.org/archives/why-should-we-be-glad-when-the-gnp-goes-up/

NPR Morning Edition Gross National Happiness Measures Quality Of Life

https://www.npr.org/templates/story/story.php?storyId=127586501

Answer 1

a) The annual growth rate of US in the last 10 years has been quiet fluctuating but has been under an average bracket of 1.5- 2.5.

b) If compared to the 2009 data, a steady increased can be seen in the data, however when we see the data on a series level, it has been fluctuating with an increase and decrease in the years from 2009.

c) The 2009 economic year marks the reviving stage of the economy from the 2008 fiasco. This is was one of the major reasons for the negative growth of the US economy. However, with strict fiscal measures and monetary policies the government revived the economy.

• Increase in infrastructure: The housing bubble burst was a terrible time for the US economy, however after that the growth of infrastructure helped it to use it as a way to buck up in the game of high incomes.
• Dotcom revolution: The internet platform was seen as the most advantageous sector which boomed during the recession period as well. With help of various third world countries, US created the IT giants to pull back its self.
• Investment in other industries: With service sector crashing, US understood the point of increasing the area of work and industry it should now dwell in. The expansion and diversification helped them to grow and naturally the consumption increased.

d) There can be seen a growth in the consumption, investment and net export. The government expenditure has also increased in the years from 2019. One thing that has to be noted is the fact that with the increase in the government expenditure there is increase in consumption. At the same time, there is increase in the goods that are imported by the economy.

Part 2

a) No, GDP is not a good tool to calculate the income of a nation.

b) Reasons of GDP or its limitation are as follows:

• It does not incorporate the welfare measures: It is only concerns the finished goods that are produced by the economy.
• Only includes market transaction: No domestic or voluntary work is estimated, which might help in estimating the welfare of the society.
• It does not describe income inequality: As the GDP has no way to to tap on the income inequality because the calculation is based solely on the finished goods and services.
• Ignores externalities: It does not look at the various aspects of population growth which also affects the economic prosperity of the country.

c) There can be increased in production but there might not be increase in the welfare of the people because they wont be able to afford the products. There might be increase in GDP due to increase in only a section of the society and the trickle down effect did not take place, which might show higher GDP but no welfare.