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Measures of the Macro Economy Recent year was not an easy one for the economy of the United States. The number of natural catastrophes and decline of oil and gas industries have worsen the economic situation in the country. At the end of 2005 the USA economy seems to become stable though the after-effect of its losses during this year will impact it for a long period of time. In late summer and early autumn the economy of the country suffered greatly. In August there was the leap of oil prices. It was provoked by the growth of world demands while there were the lack of supply.
At the end of August Hurricane Katrina hit the Gulf Coast. It caused great damage to the US economy and gas prices rose more sharply. Then at the end of September Hurricane Rita hit the energy production of the Gulf and its distribution systems. Recently Hurricane Wilma caused damage in the state of Florida. All the events of the last months influenced the rate of employment and production in the country and pressured on price level. But due to the firm economic fundamental measures, the USA economy could bear all the losses and move forward.
There are a lot of reasons which influence the economy. Different political, natural and social conditions were the main power that provokes economical changes. They impact the unemployment rate, the inflation rate, the rate of growth of real GDP as well as personal income. Well try to examine these criteria and their change under certain conditions during 2005 year.
As it was said unfavorable conditions caused the growth of unemployment in autumn. A person is regarded to be unemployed if he or she has no employment (job) during a week. But it should be mentioned that this criteria is right if a person are physically and mentally able to work at that time, if he or she is over the age of 16 and if he has been looking for a job for 4 weeks. During the last time the levels of employment and unemployment is unsteady due to seasonal events, changes in weather. Reduction of production, harvests, major holidays, and the opening and closing of schools etc. are the changes that lead to instability.
The percentage of the USA labor force, that is considered unemployed, determine the unemployment rate. If you want to calculate the rate you should divide the number of individuals in the labor force (unemployed and employed people) by the number of unemployed individuals. Unemployment is a great problem of the state. The problem provokes significant harm to the society. For example, is a person is unemployed he or she can face the problems of economic and psychological nature. First of all he will have no money to support himself or his family.
Secondly, he will try to oppress psychological stress in alcohol and drug abuse. As usual, unemployed people are considered to be a failure. They are not happy in marriage, and are inclined to criminal activity. As it was reported in September about 35, 000 jobs were lost, though before the storms there was indicated a strong tendency of hiring. But if we estimate the unemployment rate in the areas that were not affected by the storms we can see that it is rather low. The Bureau of Labor Statistics reports prove stable employment growth there.
Nevertheless. in October the unemployment rate was dropped to 5. 0 percent. Science August till October 2005 the total amount of employed people decreased. Unemployment causes great harm to a person but as well as to the state.
If the rate of unemployment increases it leads to decrease of labor resources. Another change in economy under the certain conditions is the rise of inflation. Inflation is a process of a sustained growth of prices for goods and services. Its growth is measured as an annual percentage increase. If there is a rise of inflation in the country it means that you will be able to buy goods for large sum of money. And the sum will be constantly increased.
There are different reasons that causes it, but we point the main two. First of all, inflation occurs. if there too much money for too few goods. It happens, usually, in growing economies when demand is growing faster than supply. The second reason is when companies have to increase prices because of the growth of their costs. The growth of costs happens when wages, taxes, or imports costs increased.
Government statisticians constantly measure the rate of inflation, though it is always difficult to do. If statisticians want to make inflation analyze, they gather some goods into so-called a "market basket." They calculate its price and compare the cost of this basket over time. The results are written as a price index. The index determines the difference between the cost of the basket from today till the end of examining period. In America there are two main indexes to measure inflation: Consumer Price Index (CPI) and Producer Price Indexes (PPI). The CPI identifies price change from the perspective of the purchaser; in other words, changes in consumer goods and services such as food, clothing and automobiles.
We often consider inflation as a harmful process. But sometimes it is not right. Inflation can be anticipated or unanticipated. If it is anticipated it will not influence so much on the level of living conditions, because the majority of the people will expect it. Unanticipated inflation is an unexpected growth of the price on goods.
Price is changed greatly. In the USA the past decades inflation was low and economic growth was stable. As we can see inflation influences greatly economic growth. Thats why under favorable conditions there is increase of innovations, telecommunication, and networking technologies; which influence the growth of productivity labor costs, and helped to contain inflationary pressures. As the result of it is in low prices and solid growth. We have examined two processes which impact people well-being and are the parts of macro economy.
But they are closely connected with the real gross of domestic products (GDP). It is the of goods and services which are produced by labor. GDP is property located in the United States. During the period from Spring to August economic activity appeared.
In winter the situation worsened and it demanded new strength to improve it. During the first half of the year real growth domestic product (GDP) grew and reached 3 - 1 / 2 percent at an annual rate. In the beginning of August it seemed that the economy had considerable success. But later with the situation around oil prices and pressures on inflation real growth domestic product remained elevated though slow. GDP increases in the third quarter because personal consumption expended, government spending is risen and there was fixed investment of residents. Each summer deep annual revisions are carried out.
They cover the quarters of the calendar year. Thats why the results are presented in quarters. Comprehensive revisions are made one time in 5 -years. They show definitional and classification and statistical changes. The results of Quarterly estimation of GDP is written schedules. The results of both annual and comprehensive revisions are reflected in the "latest" estimation.
During the last quarters we can observe a constant growth of gross domestic purchases. It was provoked with the growth of consumers demands after the great hurricanes destructions. Though final sales of such goods as computers or motor vehicles fall in the third quarter. The price index for GDP increased 4. 0 percent in the third quarter comparing with 3. 3 percent in the second. It measures prices paid by U. S.
residents. But the index for GDP for computer sales was only 0. 11 percentage in the third-quarter comparing with 0. 32 percentage in the second-quarter. So, under certain circumstances, gross domestic purchases can grow or slow down. It depends first of all from the necessity of the people to purchase different goods. And the ability to purchase is closely connected with incomes. In economics, incomes determine consumer purchases and consumers can purchase a limited number of goods.
One kind of incomes is personal incomes. They are incomes taken without tax. Personal incomes constantly adjusted with the purpose to calculate taxes. From the other side personal income can be defined as is an individual's total earnings from wages, passive enterprises, and investment interest and dividends. In September and August Hurricanes Rita and Katrina, which hit the Gulf Coast of the United States, affected personal income. Personal income was reduced in August and September.
It reflected uninsured losses of residential and business property. But during the last months budget position is improving and it causes the growth of personal income. Money movement is one of the main conditions for the process of incomes and outcomes. It is determined with the USA monetary policy. The main part of the national income inconstantly re-distributed with the purpose to regulate the economy of the country. Monetary policy of the state is the basis for stability of its currency.
And fiscal policy is based on monetary one. It is the totality of different fiscal relationships. The difference in growth outcomes (on wages and salaries, social payment etc. ) measures the effectiveness of fiscal policy. Fiscal policy during the time of recession can follow different ways. They are the way of expansion of it or the way of pressing it. The ways can reveal positive or negative impact to the policy.
The American government is a regulator of its economy. It determines the degree of economic activity of the country, maintains high level of employment and stable prices. The government can achieve that taking into account the level of taxes and spending (fiscal policy) and the supply of money (monetary policy). All operations with money are under supervision of the Federal Reserve System. It is an independent U. S.
government agency. The Federal Reserve System consists of 12 regional Federal Reserve Banks and 25 Federal Reserve Bank branches. By the way, all national banks have to be members of the Federal Reserve System; it is pointed by law. The Federal Reserve Board of Governors manages the Federal Reserve System. Only due to the long term prosperity of the USA economy the country could restore its forces after great economic losses. Its economy become stable and rebuild its activity.
In spite of storms destruction there is the tendency of increasing GDP during the last several decades. Nevertheless, storms affected greatly economic activity. It was held down and was diminished to 0. 4 percentage point in August and 1. 7 percentage point in September. One of the worst situation is about the rise of gasoline prices. The prices seem to become stable, though if winter in this year is colder, it will stress gasoline market, and the prices will be unstable and even higher till spring. So as gas and oil industries are the main sources of the national incomes and outcomes it will, probably, provoke the rise of prices and will influence the ability of the people to purchase.
So, there is a thread of I in the nearest future. However I think, the situation with inflation is more uncertain. And over the last decades it became worsen with the restriction of unit labor costs in the country. It helps to contain inflation. But the integration of educated workers from the former Soviet bloc, China and other countries into the world's open trading system has made a great contribution to decreasing the inflation pressure. It is a difficult time for America.
It has to pay for post-hurricane reconstruction. And the losses were enormous. First of all it is necessary to expand nation's ability to import natural gas. But I am firmly sure that certain tendency for development of The USA economic power will help the country to overcome the difficulties. And it was proved over the last decades: America is still one of the leading countries in the world market. Bibliography: Nouriel, Routine.
RGE: Why Monetary Policy Should Respond to Assert Prices, Sept. 06, 2005. Economic outlook: Testimony of Chairman Alan Greenspan. U. S. Congress, Nov. 3, 2005 web web web http: //bureau of labor statistics.
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