Us Economy And Economic Indicators Essay Research — страница 3

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inflationary pressure because it means that the prices of important consumer items like the price of milk or gasoline went up. Inflation is unhealthy for the economy because a short, fast spurt in the economy might cause the value of the dollar to decrease. This means that the same dollar able to buy a pack of bubble gum prior to inflation will not be able to after the inflation sets in. As prices rise, wages remain constant or even decrease, which would mean a rise in unemployment and inflation would cause higher interest rates and destroy the initiatives of entrepreneurs. The Federal Reserve chairman announced that it would seek to raise interest rates and the meeting would be at the end of this month. The Fed might decide to raise interest rates and this tight monetary policy

might hurt the bond market. Alan Greenspan is expected to testify before Congress and state the health of the economy. If during his testimonial he reports about tightening monetary policy, one can expect highly that he would persuade the Board of Governors to vote his way. If interest rates rise, than unemployment might rise as well as the owners might be trying to cut down on wages. The rich, upper classes desire higher unemployment because then interest rates fall and the money they have in stock markets increase due to more economic growth. According to the data, the CPI has gone up a full 1.2 points in April 1999. One must realize that in a range from the CPI of January 1997 and March 1999, the CPI never jumped over .5 points. It was on April that the CPI leaped 1.2 points

and increased seven-tenths of a percent, dangerously high and on the verge of inflating our economy. From the January 1997 CPI to the April 1999 CPI, the average has been 162.225. The April 1999 CPI was 166.2, which is 3.975 higher than the average from January 1997 and including April 1999. Therefore, our group?s conviction is that the CPI indicates inflationary pressure and the move toward higher interest rates should be accelerated. The fact that the economy is enjoying the lowest unemployment in decades should be sufficient for economic analysts to predict a resurgence in inflation. However, the recent May 1999 unemployment rate, along with the March 1999 unemployment rate, had been the lowest since the beginning of the fiscal year of 1997. If that?s not cogent enough, the

average percentage of the unemployment rate from the beginning of 1997 to May 1999 was about 4.64. The May 1999 unemployment percentage is 4.2. Low unemployment means higher risk of inflation. The mode seems to be 4.5 and the median to be 4.6. The wealth effect and the Phillips curve hypothesize that low unemployment means higher inflation. Therefore, the unemployment statistics reveal that inflation is eminent sometime soon in the near future. The statistical analysis for the GDP is rather subtle because one should not only measure the billions of chained dollars (nominal GDP) starting from the beginning of 1997 but also the percent change. The rise in the US GDP has been a steady growth from the first quarter of 1997 to the first quarter of 1999, ranging from 7166.7 billions of

chained dollars to 7754.7 billions of chained dollars. This means healthy growth of the US economic cell until the first quarter of 1998, where the percent increase in GDP was 5.5 percent, and the fourth quarter, where the percent increase in GDP was 6 percent. I mean it really doesn?t take a rocket scientist to find out that the growth was a malignant tumor! In other words, the rapid growth of the first and fourth quarters of 1998 means that inflation might manifest. I say might because the GDP analysis wasn?t really that thorough and there might be a slight chance that I am overreacting. However, my theory in GDP inflation is that there might be a lag between the rapid growth of GDP and the resurgence of inflation. The high spending and splendid output of a nation at a

particular time doesn?t mean inflation right away. So, there might be a lag between the high GDP and inflation. This lag could be short or relatively long but it will come to haunt the American consumer. That rapid growth of first and fourth quarters of 1998 means that the American consumer will soon enjoy the prosperity of the economy, which means easy money but inflation, like a ghost, will appear. As a poetic note to GDP, a good analogy, as pertaining to the lag and the American consumer, can be –after the laughter, I guess comes the tears. Retail sales, which make up the ?C? in GDP (Consumption) is a real significant indicator to track down the buying power of the consumer as well as checking on inflation. Low retail sales mean slower inflation, less GDP growth, and lower