Gross Domestic Product of the United States of America

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The United States GDP in the second quarter was a total of $5,335,067 million. GDP is a total monetary or market value of all the finished goods and services produced within a country's borders within a specific time period. GDP does not take into account intermediate goods, which are goods used to make other goods, such as oil that is then used to make gas; nonmarket transactions; second-hand transactions, and the black market. GDP then has two subcategories: Nominal and Real GDP. Nominal GDP is GDP at the current market prices and does not adjust for inflation. While Real GDP is GDP that has been adjusted for inflation. The 3 macroeconomic goals measured by GDP are full employment, stable prices, and economic growth. Full employment means that people 16 and older who are willing to work are at or lower than 4.5%. A stable rate of inflation is at or below 2%. Economic growth is the percentage of change in the profit of goods and services compared to a prior period. The United States’ current GDP is healthy due to the rate of our unemployed, which is lower than 4.5% and the inflation rate is steady.

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The United States’ current GDP is healthy because the rate of our unemployed is lower than 4.5%. The rate of unemployment in the U.S. is at a low 3.7% as of August in 2019; so the country is below the rate for full employment. There are four types of unemployment that are most prevalent: cyclical, seasonal, frictional, and structural. Seasonal unemployment is someone who only works based on the season, such as a lifeguard. Frictional unemployment is when a worker is between jobs; a person who has just been let go or quit. Structural unemployment is when a job is no longer in demand or it is replaced by technology, such as a worker who is employed in a job that is below their capabilities; this unemployment is the hardest to fix. Cyclical unemployment occurs when the economy is going through a recession or expansion. The 3.9% unemployment rate shows that all of these types of unemployment are low. This is important due to the fact it shows that a large percentage of the workforce is employed. The economic goal this falls under is full unemployment which benefits economic growth, since the more people making money, thus more money will be spent.

A business cycle is the natural fall and rise of economic growth over a period of time. There are four different phases in the business cycle which are; recession, expansion, peak, and trough. Recession is a temporary period of economic activity, a country is considered being in a recession when the GDP declines for two quarters consecutively, which goes with a trough which is the ultimate cyclical bottom. Expansion is when the GDP grows, unemployment reaches its natural state and inflation reaches 2%; the peak is the max health the GDP can reach. Currently, the United States is in the expansion point of the business model since the trough in the fourth quarter of 2008 finally broke; which was caused by the housing market crash. Since the U.S. is in an expansion period, the employment rate is lowering. As the country was in the trough the unemployment rate was 10%. As a country rises and falls through the business cycle so does the employment rate.

The United States GDP is healthy because the rate of inflation is stable. To make a point clear a stable rate of inflation is 2-3% a year. Inflation is measured using the Consumer Price Index (CPI). This measures the percentage of change in the price of a normal group of goods and services consumed within a household. As of September 2019, the inflation rate has stayed at 1.7% which means that although prices rise the common household can still afford to purchase those goods and services. Even though the rate is lower than 2% as long as that number does not rise rapidly it is optimal. As the country continues to expand the unemployment rate will lower and the rate of inflation will rise. The unemployment rate is 3.9% so it shows that the United States is steadily increasing and pulling itself out of the trough.

Since the unemployment rate is 3.9% and the rate of inflation is 1.7% the United States’ GDP is healthy. If the GDP was unhealthy as it was in 2008 it would have had the same high unemployment and low rate of inflation. Even though the inflation rate of 1.7% does not mean it is unhealthy. since the country is only in the expanding sector of the business cycle the rate of inflation will continue to climb. It's the full effort of the working people, government and businesses to expand and grow the economy.

Works Cited

  1. Nominal GDP, Real GDP, and Price Level, www.cliffsnotes.com/study-guides/economics/gdp-inflation-and-unemployment/nominal-gdp-real-gdp-and-price-level.
  2. Amadeo, Kimberly. The 4 Critical Stages of the Business Cycle. The Balance, The Balance, 27 Oct. 2019, www.thebalance.com/what-is-the-business-cycle-3305912.
  3. Amadeo, Kimberly. Where Are We in the Current Business Cycle? The Balance, The Balance, 4 Oct. 2019, www.thebalance.com/where-are-we-in-the-current-business-cycle-3305593.
  4. Chappelow, Jim. The ABC on GDP: All You Need to Know About Gross Domestic Product. Investopedia, Investopedia, 21 Oct. 2019, www.investopedia.com/terms/g/gdp.asp.
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  6. Nordqvist, Christian. Trough - Definition and Meaning. Market Business News, Market Business News, 5 Nov. 2018, marketbusinessnews.com/financial-glossary/trough-definition-meaning/.
  7. Real GDP Definition. Bankrate, www.bankrate.com/glossary/r/real-gdp/.
  8. Reserve Bank of Australia. Inflation and Its Measurement: Education. Reserve Bank of Australia, Scheme=AGLSTERMS.AglsAgent; CorporateName=Reserve Bank of Australia, 9 Oct. 2018, www.rba.gov.au/education/resources/explainers/inflation-and-its-measurement.html.
  9. Staff, Investopedia. How Did the Great Recession Affect Structural Unemployment? Investopedia, Investopedia, 12 Mar. 2019, www.investopedia.com/ask/answers/050715/how-did-great-recession-affect-structural-unemployment.asp.
  10. United States (USA) GDP - Gross Domestic Product 2019. Countryeconomy.com, Follow Us, 31 July 2019, countryeconomy.com/gdp/usa.
  11. United States Inflation Rate. United States Inflation Rate | 2019 | Data | Chart | Calendar | Forecast, tradingeconomics.com/united-states/inflation-cpi.
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