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Expected U.S. GDP Growth Rate Going Forward Name GDP: definition • GDP = Gross domestic product – Value of goods + services produced in period of time – Similar to standard of living – Determined in one of three ways Ways to determine GDP • Product approach • Income approach • Expenditure approach Product approach • Most direct way to measure GDP – Adds total of all enterprises • All products must be bought by somebody • Value of products must equal money being spent GDP ≈ economy of a country • GDP affects everyone – Predicts if economy is strong – Alternately, economy could ready to collapse • Healthy economy usually means unemployment low • Increased wages • Increased labor demand Changes in GDP • Significant changes in GDP – Usually affects stock market – Investors worry about negative GDP growth – Economists use this information to determine a recession United States GDP • Unemployment high • Inflation on the rise • Low demand for new products • Limited demand for homes Growth in US GDP in 2010 • May have been from bank bonuses • May not reflect actual increases in GDP • Many pundits predict a poor economic recovery Economic future in peril • Government markers predict poor performance • Very slow addition of new jobs • Many people out of work Bad predictions • Economists suggest low employment rates hurting GDP – Leads to limited demand for new products – Interest is low US GDP vs. foreign GDP • Other countries also hurting financially • Many countries have looked to the US • We have much in the way of high debt • Foreign countries buying our debt US debt • Unfortunately, US in credit crisis • Huge national debt – Owned by other countries – Limited ability to repay – Our tactic of printing more money devalues the dollar US GDP on trend Possible good news • US Reserve says, “moderate strengthening of the expansion in 2011.” – This department in the know – Able to make changes – Hopefully will have good incentives for the economy upturn References • Investopedia (2010) What is GDP and why is it so important? http://www.investopedia.com/ask/answers/199.asp. Last accessed February 15, 2011. • Lazzarro, J. (2010) Economists Lower 2011 U.S. GDP Growth Forecasts to 2.5%. http://www.bloggingstocks.com/2010/09/10/economists-lower-2011-u-s-gdpgrowth-forecasts-to-2-5/. Last accessed February 15, 2011. • Morici, P. (2010) GDP Trends Not Encouraging. http://www.economyincrisis.org/content/gdp-trends-not-encouraging. Last accessed February 15, 2011. • World Bank, Statistical Manual >> National Accounts >> GDP–final output, retrieved October 2009. "User's guide: Background information on GDP and GDP deflator". HM Treasury. http://www.hmtreasury.gov.uk/data_gdp_backgd.htm. "Measuring the Economy: A Primer on GDP and the National Income and Product Accounts" (PDF). Bureau of Economic Analysis. http://www.bea.gov/national/pdf/nipa_primer.pdf.
