Macroeconomic Situation

Macroeconomic Situation

Teresa Davis

DeVry University

Macroeconomic Situation

Introduction

        Living in the United States, we are lucky to have one of the most diversified and technologically advanced economies in the world, yet the United States does have some problems. To understand the macroeconomic situation in the United States, one must understand that macroeconomics is dealing with the decisions, performance, and behavior of the economy as a whole unit rather than individual markets. Macroeconomics is a broad subject that the causes and effects directly results in changes in the national income and income growth of the country. Governments use macroeconomic models and their predictions to assist in the improvement and assessment of economic policy uses.

        Looking at the United States economy at this time is showing that the country is in a recession. This is producing fear in people because there is uncertainty in when the economy will recover. The US economy grew fast until mid-2007, chronicling the average yearly growth of 2.9% over the five years to 2007. However, starting in 2007. The financial markets housing bubble burst which created doubt in the housing market, which started a downward spiral that had not been seen since the Great Depression. Consumption spending, which was constantly growing for several decades, fell apart in both 2008. People stopped spending money because of mounting unemployment and declines in rental income. People finally started to control their spending practices in the face of an unreliable future “Unemployment rose dramatically during the 2007–09 recession, peaking at 10 percent in October 2009.”(Hornstien, Kudlyak, & Lange, 2014) In April 2014, unemployment reached 6.3 percent, which is about two-thirds of the way back to its prerecession level. This could be a good sign of recovery, but macroeconomists are unsure if just using the unemployment rate correctly measures resource consumption in the current labor market.

GDP and Inflation

As we already learned, the macroeconomics is looking at the economy on a large scale. Macroeconomics uses measurements of data that are going to be in large sums, especially when dealing with domestic amounts. The GDP (Gross domestic product) is used to measure the throwaway individual revenue of a nation; GDP is defined as spending plus investment plus government consumption and investments plus net exports. After formulating the GDP, then it needs to be changed for devaluation or depreciation. Using the National Income (NI) that gauges the income earned by households, depreciation should be subtracted from the GDP. That is because used money must be interchanged as it is spent. The formula for measuring using macroeconomics is GDP-Depreciation=National Income. The U.S. Bureau of Economic Analysis accounts for GDP- Growth Rate in the United States.

Inflation, unemployment, and interest are important indication of how the economy is doing. The forecasted value of these economic indicators may differ from the real values because the circumstances may have changed during the year. Two complexly related economic concepts are unemployment and inflation. Many economists try to understand the connection between the concepts of inflation and unemployment. Possible explanations of this relationship can be thought of in either the short term or the long term. There is an opposite relationship between them in the short term. Therefore, when the unemployment is on the higher side, inflation is on the lower side and the opposite is true as well. The difficulties inflation presents are trickier to explain than those modeled by unemployment. The Bureau of Labor Statistics (BLS). Is a measure of inflation in the United States is the Consumer Price Index (CPI), recorded by the government who uses this report to check the inflation rates. Cyclical unemployment is caused by a decline in total spending is called and classically begins in the depression period of the business cycle. Unemployment increases when the demand for services and goods declines. We already know that unemployment comes in three general types know as, structural frictional, and cyclic. The natural unemployment rate is frictional plus structural.

When thinking what could be draining the US Economy, economists do not believe that a demand on the market is caused by high-energy prices, particularly the real prices for liquid fuels could be causing to the current unease of the economy. “Certainly total energy prices have been higher recently than in most periods of recent history as is obvious when we plotted the dollars spent on fossil fuels, including petroleum, natural gas, and coal, as a percent of GDP.”(Aucott & Hall, 2014) Which is the energy cost share of GDP .Consequently this prevents the necessity for inflation improvements.  Fuel prices show that oil is immeasurably the major supplier to the cost of fuels.