Expected U.S. GDP Growth Rate Going Forward Name

GDP: definition GDP = Gross domestic product – Value of goods + services produced in period of time – Similar to standard of living – Determined in one of three ways

Ways to determine GDP Product approach Income approach Expenditure approach

Product approach Most direct way to measure GDP – Adds total of all enterprises All products must be bought by somebody Value of products must equal money being spent

GDP ≈ economy of a country GDP affects everyone – Predicts if economy is strong – Alternately, economy could ready to collapse Healthy economy usually means unemployment low Increased wages Increased labor demand

Changes in GDP Significant changes in GDP – Usually affects stock market – Investors worry about negative GDP growth – Economists use this information to determine a recession

United States GDP Unemployment high Inflation on the rise Low demand for new products Limited demand for homes

Growth in US GDP in 2010 May have been from bank bonuses May not reflect actual increases in GDP Many pundits predict a poor economic recovery

Economic future in peril Government markers predict poor performance Very slow addition of new jobs Many people out of work

Bad predictions Economists suggest low employment rates hurting GDP – Leads to limited demand for new products – Interest is low

US GDP vs. foreign GDP Other countries also hurting financially Many countries have looked to the US We have much in the way of high debt Foreign countries buying our debt

US debt Unfortunately, US in credit crisis Huge national debt – Owned by other countries – Limited ability to repay – Our tactic of printing more money devalues the dollar

US GDP on trend

Possible good news US Reserve says, “moderate strengthening of the expansion in 2011.” – This department in the know – Able to make changes – Hopefully will have good incentives for the economy upturn

References Investopedia (2010) What is GDP and why is it so important? Last accessed February 15, Lazzarro, J. (2010) Economists Lower 2011 U.S. GDP Growth Forecasts to 2.5%. growth-forecasts-to-2-5/. Last accessed February 15, Morici, P. (2010) GDP Trends Not Encouraging. Last accessed February 15, World Bank, Statistical Manual >> National Accounts >> GDP–final output, retrieved October "User's guide: Background information on GDP and GDP deflator". HM Treasury. treasury.gov.uk/data_gdp_backgd.htm. "Measuring the Economy: A Primer on GDP and the National Income and Product Accounts" (PDF). Bureau of Economic Analysis.