Student Name 07/02/2008

Economy: GDP revised up to 1% rate for first quarter WASHINGTON (Reuters) — The economy grew at an upwardly revised 1.0% annual rate the first three months of 2008, helped by stronger consumer spending and exports, a Commerce Department report showed on Thursday. The department estimated a month ago that gross domestic product, or GDP, grew at a 0.9% annual rate. GDP measures the total output of goods and services within U.S. borders. Economists polled by Reuters had expected the upward revision to a 1.0% pace. The figure was initially reported in April at an anemic 0.6%, fueling concern that the economy may be slipping into recession. A second report Thursday confirmed more recent lackluster economic performance. The Labor Department said new applications for unemployment insurance stayed at 384,000 the week ended June 21, no change from the previous week. The figure was higher than the 375,000 economists were forecasting. And the four-week moving average of claims, which smooths out week-to-week fluctuations, rose 2,250 last week to 378,250. The GDP report said consumer spending, which accounts for more than two-thirds of national economic activity, rose 1.1% in the first quarter, a touch stronger than the 1.0% estimate last month, helped by increases in medical care services. Despite the upward revision, consumer spending remained at the lowest level since the second quarter 2001, which was during the last recession. The fragile economy, shaken by housing, credit and financial debacles, has made people and businesses more cautious in their spending and investment, restraining overall economic activity. More normal growth would be along the lines of a 2.5% to 3% pace, analysts said. Fallout from the housing crisis continued to be a drag on economic growth: Builders slashed spending on housing projects in the first quarter by 24.6% on an annualized basis. That wasn't as deep, though, as the 25.2% cut in the fourth quarter. One bright spot keeping the economy going in the first quarter was exports. Exports grew at a 5.4% pace, much stronger than previously estimated, but down from a 6.5% growth rate in the prior quarter. The falling value of the U.S. dollar has made exports less expensive to foreign buyers. With exports rising and imports falling, the trade picture improved. Some analysts predict slowdowns elsewhere in the world, such as Europe and Japan, will cool future demand for U.S. exports. That would mean exports could be less of a bracing force for the economy in coming quarters. One bright spot keeping the economy going in the first quarter was exports. Exports grew at a 5.4% pace, much stronger than previously estimated, but down from a 6.5% growth rate in the prior quarter.

Economy: GDP revised up to 1% rate for first quarter Exports grew at a 5.4% pace, much stronger than previously estimated, but down from a 6.5% growth rate in the prior quarter. The falling value of the U.S. dollar has made exports less expensive to foreign buyers.

Aggregate Supply & Aggregate Demand Graph AS AD 1 Real GDP Price Level AD 2

Recap Exports grew at a 5.4% pace, much stronger than previously estimated, but down from a 6.5% growth rate in the prior quarter. The falling value of the U.S. dollar has made exports less expensive to foreign buyers. AS AD 1 Real GDP Price Level AD 2