Research Paper On American Public University
The U.S. Economy from 2004 to 2014
The American Economy has faced economic crises from 2004 to 2014. The great recession started in 2008 was the biggest challenge for the American Economy. The American Economy has been based on innovation and consumption. The economy policy implemented in the U.S. was leading people to make higher incomes and spend more inside the country. Spending culture has created a habit of the Americans. Making high income and spending more and more has been accepted as a prestigious behavior among the citizens.
However, the American Economy has faced crises stemming from the spending culture. Many Americans were interested in buying luxury and expensive houses. The financial institutions have developed easily-accessible credits in the different fields of the life, and many Americans could get credits easily to support their high consumption costs. However, this situation has created a balloon in the sub-mortgage credits market. The crises the American Economy faced had been shaping the American Economy at macro and micro level.
In this essay, I will argue the economic development in the American Economy, and especially the situation, after the global financial crisis started in 2008, will be the main issue.
Economic Growth in the U.S. Economy from 2004 to 2014
The economic growth in the U.S. has followed an increasing trend from 2004 to 2014 with a break in 2008. The break in 2008 due to the global financial crisis has caused negative influences on the American Economy; however, the graph 1 indicates us that the American Economy is continuing its increasing trend in the long term. Analyzing the GDP graph shows us that the GDP growth after 2008 has fallen down in the short run; however, in the long run, it seems to be increasing.
Graph 1: GDP in Nominal and Real Values from 2004 to 2014
The graph above has the nominal and real GDP statistics over the years from 2004 to 2014. The real GDP is calculated at the prices at the level of 2009. The graph indicates that there has not been any radical change in the prices and because of that the discrepancy between the real and the nominal values is little.
The occurrence of the crisis in 2008 has caused a breakdown, and the influence of the crisis has deepened in the following a few years. After the second quarter of 2010, the GDP has started increasing again. Even though, the growth rate of the GDP is relatively less, we observe that the American Economy continues its growth.
The American Economy is one of the largest economies in the world and being a big economy creates some disadvantages for the U.S. although the U.S. has an important economic and political power in the world. For this reason, being a large economy, the economy management in the U.S. is relatively harder. Thus, managing the situation after a financial crisis is comparatively harder in the American Economy.
Graph 2: GDP Growth in Nominal and Real Values from 2004 to 2014
The graph 2 exhibits the real story of the economic growth in the American Economy and the influence of the financial crisis. As seen in the graph, the economic growth has slow down starting from 2004 to 2009. Thus, the American Economy could not produce enough income at a satisfying level for the Americans so that they could continue their high level of spending. This problem has forced the mortgage credit providing financial institutions to develop a mortgage insurance system to protect them from a possible failure of the market. However, the mortgage insurance system has had to bear a high risk in the market.
The dropping income growth in the economy was the main reason behind the financial crisis, and the sub-mortgage market was the weakest link in the American Economy. For a healthy economic development, the American Economy needs to reach a high level of economic growth.
Graph 3: Monthly GDP Growth in Nominal and Real Values from 2004 to 2014
The graph 3 indicates that the seasonal fluctuation of the economic growth occurs at a larger interval. Analyzing the top and the bottom points in a year, we might conclude that the American Economy is not stable throughout the year. The biggest interval between the top and the bottom point is 2009 and in the following years we observe that the difference between the top and the bottom point of economic growth rate is getting larger compared to the times before 2008. The instability in the economy might cause an unsuitable environment for the businesses. Considering that the sustainability of the businesses is the guarantee of a sustainable national economy, the businesses need relatively more stable income providing economy.
Depending on the GDP growth statistics, the American Economy has started facing a recession problem starting from 2004. The economy could not produce enough income because the economy could not provide a suitable environment for the incumbent businesses in the markets and the new entrepreneurship. The following part in this related to the inflation and the unemployment statistics support this claim.
Unemployment and Inflation in the American Economy from 2004 to 2014
The American Economy has been one of the most successful economies all around the world at creating new business and job opportunities for its citizens. Considering that the U.S. has one of the largest populated countries, providing job opportunities for the citizens needs some extra economic growth compared to the other countries. As mentioned in the previous part, the American Economy could not produce enough income for the needed extra economic growth in the American Economy.
Graph 4: Unemployment Statistics in the American Economy
The recession in the American Economy after 2004 has resulted in increasing unemployment rates in the economy. As can be easily seen in the graph four above, the unemployment rate after 2004 has not declined and also it has rapidly increased after 2008. After 2008, the unemployment rate has fallen down due to the recovery policies. It is possible to claim that the recovery policies could manage to overcome the increasing unemployment problem in the short run. However, that does not guarantee that the economy can produce enough job opportunities in the long term.
Graph 5: Inflation in the American Economy from 2004 to 2014
As known from the Phillips curve in the macroeconomics, while the unemployment rate is increasing, there should be a low level of inflation and vice versa. The Phillips curve expects a negative relation between the general price level and the unemployment.
The American Economy has faced an increasing unemployment rate between 2004 and 2009; however, the inflation in the economy has been at a low level. For this reason, the low level of inflation in the economy even after the recovery policies implemented following the global financial crisis in 2008 indicates us the deep recession in the American Economy. Very low level of inflation is not desired as much as a high level of inflation. Inflation is a sign of a living economy; for this reason, a healthy economy should have at least over 3% inflation. The inflation rate is less than 3% after 2009, and that is a sign of recession in the American Economy.
The American Economy has faced a recession starting from 2004 and the financial crisis in 2008 has deepened the influence of the recession on the economy. The global financial crisis in 2008 was a result of the ongoing recession in the economy, and it has created a global influence.
After the global financial crisis, the American government has started a recovery program, and it has helped the economy decrease the unemployment rate and increase the GDP. However, the GDP growth is still not at the desired level. The low level of the inflation rate indicates that the American Economy is still struggling against the recession.
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