GDP Research Paper
What trends in real GDP have occurred in the time period shown in the BEA release highlights document?
The United States of America experienced an increase of 3.2 percent in the GDP from the third quarter of 2013 to the fourth quarter. However, these were just estimates that were based on provisional results that are subject to changes and revisions. The increase in GDP can be attributed to various reasons. For instance, there was an increase in exports, private inventory investment, nonresidential investments, and personal consumption expenditure among other reasons (BEA). However, imports also increased; imports are normally subtracted from the Gross Domestic Product. The speed at which the GDP was being produced was reduced tremendously in the fourth quarter (Brezina, 22). This can be attributed to the reduced nonresidential investments coupled with reduced local government investments.
What time period shown in the document experienced the most significant growth?
The U.S. economy experienced a boom in the fourth quarter of 2013. More people and businesses were willing to spend more than in previous years. However, the federal government was a major disappointment. Instead of contributing positively to the GDP, the federal government was responsible for negating the GDP. Compared to 2012, 2013 experienced the greatest growth in real GDP. The Bureau of Economic Analysis indicates that the real GDP experienced an increase of 2.7 percent as compared to an increase of 2.1 percent in 2012. These percentages are “measured from the fourth quarter of 2012 to the fourth quarter of 2013” (BEA). Furthermore, there was a decrease in the price index for gross domestic purchases. In 2013, the U.S. had an increase of 1.1 as compared to a 1.5 percent increase in 2012. In a nutshell, 20133 experienced a large increase in GDP as compared to 2012.
Based on the data you have researched, what do you project real GDP will do during the duration of this year? Be specific in your answer.
It is evident that the first quarter of 2014 will not be as fast as the last quarter of 2013. This is not to say that the country will not be making profits from private investments and other forms of revenue generating activities. Sharf suggests that GDP grows gradually over the year. Therefore, the growth in GDP will be gradual. It is anticipated that 2014 will be better than 2013 “on a year-over-year basis.” (Sharf) however, on a “quarter-over-quarter” basis, 2014 will not surpass 2013. The momentum with which the U.S. entered the fourth quarter is expected to continue into 2014. The economy will grow at a steady but sustainable rate.
What will be the primary cause that will cause your prediction in the previous question to occur? Why?
The U.S economy will grow slowly in 2014. This is as a result of the government’s attempt to reduce government expenditure. Since government expenditure is a component of the GDP, it is likely to reduce the GDP (Brezina, 47). Unemployment will also be associated with the slow growth in the GDP for most people will prefer to spend less. Personal consumptions contribute to 70 percent of America’s GDP. It is also forecasted that the Federal Reserve may decide to reduce its quantitative easing program. This will potentially result in expensive loans and mortgages due to increased interest rates (Brezina, 47). Nevertheless, this will only happen if the inflation rate surpasses that projected by the Federal Reserve. Fortunately, the increase in exports to new markets has rally boosted the GDP growth. The recovery of the housing market is also an indication that the GDP will be increased. The rise in home prices has attracted more investors in the housing industry. These are some of the indications that 2014 is likely to experience a great growth as compared to 2013.
Brezina, Corona. Understanding the Gross Domestic Product and the Gross National Product New York, NY: Rosen Pub., 2012
Bureau of Economic Analysis (BEA) National Income and Product Accounts Gross Domestic Product, 4th quarter and annual 2013 (advance estimate. January 2014 Web February 11, 2014 https://www.bea.gov
Sharf, Samantha. U.S. GDP Grew 3.2% In The Fourth Quarter 2013. January 30, 2014 Web February 11, 2014 http://www.forbes.com