U.S. History of Where Macroeconomics Term Paper

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U.S. history of where macroeconomics has been, where it currently is, and where it is expected to go. Also examining the financial sector (banks and interest rates) and monetary policy comibine to provide a means for macroeconomics management

This report is aimed at describing the U.S. macroeconomic environment, by taking into consideration macroeconomic indicators that would highlight the most important observed tendencies. In the end, the conclusions on the topic under the form of macroeconomic perspectives on the U.S. economy shall be presented.

The U.S., as the most important player on the economic global market, due to its extensive and durable economic growth, has attracted the inquiries of foreign observers, willing to understand the secret to U.S. development. One place to start is the macroeconomic figures that the U.S. authorities have been reporting over the years.

Whether we are referring to GDP components or to economic growth, to unemployment or inflationary conditions, the macroeconomic elements portrait in real and nominal terms the status of an economy. Taking into account that the U.S. is considered to be the most developed state at a global level, all the other countries monitor its evolution, by tracking these particular macroeconomic elements that indicate the pace of development (recession, economic boom) and the social indicators - like unemployment, salary levels, saving levels.

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A special macroeconomic section is dedicated to the financial side, especially to interest rates and Federal Reserve policy. It is a well-known fact that the performance of an economy, or its development pace, is permitted within the limits established at a national level by the National Bank, mainly in setting the interest rates and the minimum reserves level. High interest rates induce a reduction in economic growth, due to the fact that investors will be tempted to save rather than invest in the economy, because higher returns will be ensured, due to higher interest rates.

Term Paper on U.S. History of Where Macroeconomics Has Been, Assignment

On the other hand, the official reserves, the section of bank deposits restrained by the Federal Reserves institution as savings, limits the growth of the monetary supply, by limiting the credit activities of commercial banks. By limiting and controlling the monetary supply, the Federal Reserve ensures both that the inflationary pressures on the market are sustainable and that there is no currency excess on the market.

In the next paragraphs we shall discuss the macroeconomic indicators registered by the U.S. economy at two moments in time - in 2000 and around the current period (2006-2007) in order to be able to build an evolution perspective on future macroeconomic figures.

GDP and its components

Nominal GDP billions of dollars)

Real GDP billions of 2000 dollars)

GDP Deflator index 2000=100)

Population in thousands)

Nominal GDP per Capita current dollars)

Real GDP per Capita

2000 dollars)



The statistical table above was issued by the Federal Reserves and reflects the GDP evolution through the period 2000-2006. As it could be observed, the Nominal GDP value was of 9817 billion dollars while the population amounted to 282.217.000 inhabitants. The real GDP per capita was 34785 dollars, one of the highest per capita figure in the world. We will use the Nominal GDP in 2000 for our investigation for the real gross domestic product indicator in 2006.

If we are speaking about the GDP consisting elements - namely the Consumption, Investments, Net Exports and Government expenditure - we should take into consideration their modification during the mentioned period 2000-2006, as well as their contribution to the general performance - percentage contribution of each of the elements within the GDP.


On average, the income level of the American citizens is superior to other countries, so they can enjoy better living standards and conditions. However, there are significant patterns in terms of consumption that shall be discussed in this paper. First, there is a current global campaign of promoting the limited character of Earth's resources. This thing has not, up to the present moment, managed to reduce the ever increasing levels of consumption. The American approach to consumption had attracted the eyes of many international observers and non-governmental organizations that highlight the fact that although U.S. counts only for 4% of the world population, it consumes 22% from the entire energy resources (oil, coal, electric energy). The consumption-oriented policy of Americans leads to enhanced levels of pollution and CO2 emissions of about 18 times higher than in the developing countries, whose population represent a proportion 41% from the global population.

If we consider the figures related to consumption, we can notice that it increased in real terms from 5865 in 1996 to 7208 billion dollars in 2006. This surge in consumption of approximately 19% can be a very drastic one especially if we take into consideration the relatively short time span (10 years). As an interesting idea, the contribution of consumption to the overall GDP has slightly decreased from 69.2% in 1996 to 68.9% in 2006.


Investments can be considered as acquired fixed assets, under any form such as stocks, other types of securities, real estates for a longer period of time in expectation of future returns. Investments represent a main component of the Gross Domestic product, as the level of the investments determines future output growth and business cycles. The reason behind the investment process is that people save the amount of money they do not spend on current expenditure.

On the other hand, the accumulation of capital enables easy access to capital for corporations. Investment assumes reduced consumption, or at least depositing part of extra funds into different financial placements in hope for future returns. An impressive investment growth rate was achieved during the period of 1996-2006-1060 billion dollars to 1469 billion dollars. So the percentage growth is approximately 50%, being quite an impressive figure for a consumption-oriented society. This positive movement in investments offer good prospects of growth for the society as a whole, and particularly for the GDP as an indicator.

Government expenditure

In times of recession, the government must intervene so as to limit the negative consequences of this economic situation. More specifically, the central authority can buy products and services in order to improve the demand and increase employment. Its regulating function is clearly identified in the macroeconomic theory having the precise purpose of speeding up the economy during recession.

Another situation when the Government intervention is required, is when a particular industry needs to be stimulated from central authorities. In some countries, this industry is the weapon production sector and the Government assures product orders for those particular products, encouraging production and therefore creating jobs in the field. If we look at the figures, we may find that the value corresponding to the reference year 1996 is 1200 billion dollars as compared to 1400 billion dollars in 2006. As a general tendency, it was observed that the Government expenditures are decreasing in its contribution to the Gross Domestic Product, from 9.4 in 1996 to 7.9 in 2006.

Net Exports

The Net Exports indicator equals the total exports registered within one state minus the total imported products and services within that country. The macroeconomic indicator can be either positive or negative, and in turn can improve or lower the Gross Domestic Product, as the case may prove to be. The ideal case for a nation would be that of positive commercial positions, but this is not the situation in the U.S. In the present, due to a high commercial deficit.

Some analysts

Joani Dong - 'U.S. exports are the apples of importers' eyes',

AgExporter) consider that exports are the main drivers of economic growth and performance, the single viable and durable modality by which a country can demonstrate its international competitiveness. If a country is successful in exporting a high value-added product, for example a personal computer system, it proves that it can optimally produce those products, at suitable costs and with adequate efficiency. To be more exact, let us regard the actual numbers that depict the past and current situation the net exports.

The exports in U.S. In 1996 amounted of 896 billion dollars, while in 2006, ten years later, the exports grew with 1686 billion dollars, registering an impressive 105% growth rate. On the other term of the indicator, the imports grew at a similar pace, from 940 billion dollars in 1996 to 1740 billion dollars in 2006. It must be said that the trade deficit that U.S. is experiencing - due to the fact that imports are increasing at a faster pace than exports - has negative effects on the balance of payments. One direct consequence is that more money are directed to foreign producers for the respective imported products, as compared to the funds directed to national producers who send their merchandise for export.

Economic growth strong and durable economic growth rate is the target of every government as it reflects the pace at which its economy is prospering and developing. In the U.S. case, the economic growth indicators were closely monitored in order to see which of the sectors proved to… [END OF PREVIEW] . . . READ MORE

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