National economic data is a hugely important aspect of government function. Interpreting what national economic data is significant, which parts are cause for concern, and simply understanding the broad scope of economic health in a given country is an enormous task. This sample economics paper explores a national economic data study of the United States that incorporates a number of important economic metrics.
National economic data study
The study of economics has generally been known to have begun with Adam Smith’s The Wealth of Nations. Common economics observes producers, consumers and the interaction and trade between them. It has evolved into several different branches such as macroeconomics, microeconomics, and political economics. There are a lot of different areas an economist can study. This is in part because economics is a social science that studies the process of rationalization; the weighing of costs, and benefits. Take oil for example.
Take oil for example. The macroeconomic perspective on oil production impacts the national economy through jobs growth or decline, import and export revenue, and taxes on energy companies. On the other hand, oil is a power political indicator. Economists can determine the power and decline of a nation through an analysis of its oil production.
Costs versus benefits
If the benefits exceed the costs then the decision is worth the action it requires. As human societies began to group and interact with one another, they eventually developed roles and specialization. With specialization according to comparative advantage, followed by trade amongst the members of the society, the society could achieve maximum growth and development. The same basic aspects still hold true in our economy today.
Our society collectively specializes in the production of goods and services which result in the society’s Gross Domestic Product (GDP). With advances in technology and enhanced efficiency through learning, societies have typically experienced growth as each year passes. However, most recently in time, the United States and the global economy have undergone a great recession. This paper takes a look at the economic statistics of the United States between the years 2002 to 2012 as well as the events surrounding those time periods.
It is hypothesized that several violations of rationalization have been violated as well as ethics and human rights, resulting in the reoccurring global recessions in history. With the pattern so clearly exposed, several recommendations are proposed to remedy the damage that has been done with the goals of growth and prosperity in the future of all.
Economic indicators within the United States
There are several general indicators of economic development within a democratic nation. Of these indicators, GDP is the most general. The term “Gross Domestic Productivity” means just as it implies; the total amount of goods and services a society has produced in a given year. Analogized to a microeconomic scenario, it can be thought of as a single individual in an apartment who goes to work every weekday at a factory for well-being a day at $8 an hour.
The worker would be earning $64 in productivity each day for his or her work; $320 a week. That is the total productivity of that individual, that unit of production. In macroeconomics, the same is considered except for the production being the total amount for the society as a whole.
Measuring GDP and NDP
There are two ways to measure Gross Domestic Productivity and these are Nominal Gross Domestic Productivity (NDP) and Real Gross Domestic Productivity (RDP). The difference between the two is simple; NDP measures the amount of money the productivity has earned the society and RDP measures the amount the society produced adjusted for inflation. RDP is generally known to be a better indicator because it is adjusted for inflation and thus more accurate.
If a society produced 1 million pizzas and the pizzas were valued at $10 each then the society would have earned $10 million. But if the society valued pizzas at $1,000 each then the society would have earned $1 billion for the same 1 million pizzas. This is why RDP is a better indicator of the productivity of a country than NDP. However, NDP is still useful to compare with RDP to see if the real amount of GDP is consistent with the nominal amount. If there is a bubble building, then economic policy can be initiated to prevent the economy from rapidly receding.
Major issues in the American economy
Another major indicator of economic well-being is the unemployment numbers. The economy could be producing 10 million pizzas if it had pizza factories to produce that many, but only a handful of people who run the factories could be making all of the profits while 90% of the society is unemployed. This is why understanding and observing the unemployment rate along with the NDP and RDP is important to the study of economics. The unemployment rate in the United States from 2002-2012. The U.S. economy has a fairly low unemployment rate at about 6% in 2002 and decreases to almost 4% in 2006. But as the recession of 2008 comes around, the unemployment rate soars to almost 10%. The unemployment rate has decreased to about 8% in 2012, which is still notably more than 2002 until 2006.
But as the recession of 2008 comes around, the unemployment rate soars to almost 10%. The unemployment rate has decreased to about 8% in 2012, which is still notably more than 2002 until 2006. But, as it can be seen from the earlier figures, our real GDP is higher than it has ever been. What this means is fewer resources are being employed to produce more. If that is the case, then there are fewer people making more of the money while more of the people are making less of the money. With all of this building up, it is important to consider the inflation rate as it is displayed in figure 6.
Consumer Price Index and the cost of goods
The Consumer Price Index (CPI) measures the inflation rate for basic consumer goods in a market economy. Eggs, milk, and gas prices, for example, will be taken and measures from year to year. The price changes in total are divided by former prices and totaled into what is referred to as a rate of inflation. Essentially, the CPI measures inflation and the inflation is displayed in figure 6. What can be seen in figure 6 is that there is a sharp increase of prices years before the recession.
So as the society is steadily increasing its GDP and producing more, the cost of providing the essential consumer goods such as milk, eggs, and gasoline is rising greatly. With the cost of everything rising, families and businesses alike are unable to keep up which leads to businesses closing and eliminating jobs resulting in the apparent depression in the economy. It is clear through looking at the NDP and RDP, their respective growth rates, the unemployment rate and the inflation rate that something has clearly gone on between the years of 2002 and 2012.
Major events impacting the American economy
The first major event that has gone on right before 2002 was the terrorist attacks on the World Trade Center on 9/11. This led to the “War on Terror” which was essentially a war in Iraq and Afghanistan. Because of the war, the economy needed to produce goods to be used for war. With that came a lot of spending on war. Because of the spending on war, without any direct income or return on investment coming from that spending, it was essentially a pouring of productivity outward into whoever the parties in control were.
This pouring came at the expense of the average people, the individual workers simply looking to work and provide the basics for their families. Another factor that did not help the economy was the banking industry and lack of consumer-friendly banking regulations.
In order to increase profits, banks intentionally gave out loans to people who had a very low probability of being able to pay the loan back. As a result, the debtor would make the first several payments, going into the hands of the banks, and then default on the financing because they were unable to pay it, resulting in foreclosure of the home for example and the house being repossessed by the bank.
Now the bank has payments from this debtor as well as the house. It is predatory practices by the banking industries and big business corporations outsourcing and taking advantage of less fortunate circumstances around the world that the economy underwent the depression it underwent. Does this depression seem familiar?
The Great Depression
The most famous depression took place in America after World War I. Even before the First World War came the Federal Reserve Act that created the federal monetary system we have today. This led to the creation of a private institution that handled the coining of the U.S. federal government. However, not being a federal organization, it was about as federal as FedEx. Because this Federal Reserve commission is a private organization, they have private interests at stake. With private interests at stake, it can be easily predicted that decisions benefiting their private interests will be made instead of decisions that benefit the private interests.
As a result, predatory practices like the banking failures of the most recent recession have taken place. As the federal reserve system was created in the early 1910’s, the private individuals in control were able to use this money to finance WWI and make a huge return, WWII and make a huge return, the Korean and Vietnam war and make a huge return, the first Persian Gulf War and starting in 2002, the second Persian Gulf War and the war in Afghanistan. It is greedy, negligent practices of select few individuals that lead to the irrational, costly, deadly, bloody wars that not only affect the societies they take place in but the people at home working in these economies.
In conclusion, it has been clearly demonstrated how a basic review of general economic statistics can display a lot of information. Simply seeing the pattern of growth in productivity, unemployment and inflation, the symptoms of an upcoming recession can be apparent. With the ability to perhaps predict recessions, there is a possibility that societies will be able to prepare for them to minimize their impact, or preventing them from happening at all. One thing is for sure, as long as there are big, greedy, self-motivated people in powerful positions without any sort of accountability, there will always be inequality in the world. But luckily, in this age of information, our global society as a whole is in an unprecedented position to achieve tremendous levels of growth and prosperity.