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Example research essay topic: Goods And Services Standard Of Living - 1,223 words

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Daekwon the chef and Rza Shogun, Sergio Suarez, Sylvia Lin, Anne-Sophie Young A Treatise on the Value of Economic Indicators The US Economy and Economic Indicators The United States economy is the strongest and the most affluent in the world. Besides having the highest GDP (Gross Domestic Product), the United States has a complex system of regulating economic policy and controlling the money supply. The system also regulates banks and financial institutions, and even has a central bank (Federal Reserve Bank) that decides on significant issues, such as raising interest rates. There are many economic indicators that affect the economy such as the CPI, which is the measure of prices at the consumer level for a fixed basket of goods and services, and the unemployment rate. Other indicators include the GDP, which measures the dollar value of all the goods and services of a nation, retail sales, and the consumer confidence index (CCI). The CPI is the measure of inflation, and is released every month by the Bureau of Labor Statistics.

Prices are collected in 85 cities across the country on thousands of different products and services from establishments of all kinds. It reflects prices of food, clothing, shelter, fuels, transportation fares, charges for doctors and dentists service, drugs, and all sorts of other goods and services that people buy for day-to-day living. The CPI is used by the Federal Reserve to analyze the data and act accordingly to the interpretation of it. For example, on May 19, 1999, the Federal Reserve decided to hold interest rates for now but are debating to raise interest rates in the near future because the CPI increased seven-tenths of a percent, the highest in eight and a half years. There are two types of CPI. The CPI-U relates to the urban workers, and accounts for about 80 % of the civilian population.

The CPI-W relates to the wage earners, and accounts for about 40 % of the population. The CPI, a reliable measure of the current state of the economy, is used as a warning for inflation, deflation, and disinflation. The CPI generally increases every year because the standard of living rises through time. The unemployment rate is also significant in the fact that it measures the percent of the population that are currently not legally employed and are actively seeking employment. Recently, because of the strong, healthy US economy, the unemployment rate was the lowest in peacetime since 1957. Low unemployment correlates to a good economy but it can mean increasing inflation because the workers, who have been working as wages increased, can spend more and drive up prices.

More jobs have become available because of economic growth including strong consumer confidence and low interest rates. Too low of an unemployment rate is bad because it will cause inflation due to the wealth effect, which means that people will get richer and richer until inflation sets in. According to the Phillips curve, it was widely believed that as unemployment decreases, inflation would increase. Recently, there has been an anomaly because this theory hasnt been true.

This relationship has not been so prominent due to the recession in foreign markets. Recession in foreign markets can cause an increase in the unemployment rate because factories that export goods to other nations will have to cut down on production because people there cannot buy the products. Inflationary pressures caused the Fed to announce an expected rise in increase rates because of high CPI, but the unemployment rate remains almost fixed at 4. 3 percent, which is still low, as well as being a factor in inflation. The GDP measures the dollar value of a nations spending and output in goods and services. The GDP can increase when there are inflationary pressures, which meant that the economy is growing at an unhealthy rate.

The GDP, if it has risen dramatically, means that prices will skyrocket and if it falls dramatically, a recession might occur. The GDP is measured by a mathematical macroeconomic formula. The formula is GDP = C+I+G+ (X-M). Prior to August 1991, the GNP was used as a nations economic indicator, which measured the output of goods and services by US residents anywhere in the world. However, the GDP measures a nations economic activity regardless of who owns the productive assets in that country. For example, the output of United States-owned companies based in Australia is considered part of Australias GDP rather than part of the U.

S. GDP. Also, GDP is difficult to measure because every nation has its thugs that does business illegally, such as in the drug trade or people who smuggle goods in another nation. The C in the formula above is Consumption, the most important sector in the US economy. This sector represents consumer spending, and is more than 65 percent of real, or inflation adjusted, GDP. The I is Investment, which is composed of residential (single family and multi-family housing) and nonresidential (auto factories, computers, oil rigs, etc) and change in business inventories which are either added if there is a surplus or subtracted if there is a drop.

Investments take about 15 % of the GDP. The G in the equation is Government Spending, which is in federal, state, or local form and it takes up approximately 20 % of the GDP. Federal spending is 36 % of all government expenditures and are used in entitlements such as Social Security or welfare, 45 %, defense such as in buying aircraft carriers or nuclear weapons, 18 %, discretionary spending, such as NASA or FBI, 20 %, and interest payments, 15 %. The (X-M) stands for Net Exports because exports add to the GDP while the imports are subtracted since imports will represent another nations GDP. The importance of the trade sector is that it represents 13 % of the total spending in the economy. The US currently has a huge deficit on goods and services, where (X-M) is negative, which totals about $ 150 billion.

The GDP, besides measuring the output in terms of goods and services, can measure the standard of living in the world. Economists divide the GDP into the total population to get the GDP per head and convert it into dollars to compare the standard of living between two nations. Surprisingly (to me, Daekwon the chef), nominal GDP, which is not inflation adjusted, subtracted from real GDP, which is, can be used as a secondary inflationary indicator, which is dubbed the chain price index. Retail sales is also an important indicator because it takes a huge role in the GDP.

It roughly takes up two-thirds of the GDP and can even predict the sentiments of the American consumer. In our laissez faire society, where the attitude of consumers are objectively analyzed by greedy capitalist gluttons, low retail sales mean less of a GDP growth, which means slower inflation, and lower interest rates. High retail sales means exactly the opposite. The Census Bureau of the Department of Commerce laboriously collects the retail sales data and analyzes it.

From a random survey of retail establishments such as Macys, Nordstrom, or Lord and Taylors, retail sales are broken down into two categories, durable and nondurable, with the former accounting for about 40 %, and the latter 60 %. Retail sales are rather difficult to forecast and the revisions are immense...


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Research essay sample on Goods And Services Standard Of Living

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