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-gdp-growth-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.hm-treasury.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.