Business cycle & Economic Outlook 2

This Case Assignment focuses on the January 29, 2010, first estimate of U.S. real gross domestic product (Real GDP) for the fourth quarter of 2009, reported by the U.S. Bureau of Economic Analysis (BEA). The current data and historical data are explained. The meaning of GDP and potential impacts of changes of GDP are explored. This lesson will also raise questions about the impact of the current level of growth on the U.S. economy and individuals. Here is an interesting article that was published the same day: Rampell Catherine. "US Economy Grew at Vigorous Pace in Last Quarter." New York Times January 29, 2010. Retrieved February 22, 2010. Retrieved May 17, 2010 from: http://www(dot)nytimes(dot)com/2010/01/30/business/economy/30econ.html Introduction: Each month, the Bureau of Economic Analysis (BEA), an agency of the U.S. Department of Commerce, releases an estimate of the level and growth of U.S. gross domestic product (GDP), the output of goods and services produced by labor and property located in the United States. This assignment focuses on the BEA's "first estimate" of real GDP released on January 29, 2010, for the fourth quarter (October-December of 2009. Understanding the level and rate of growth of the economy's output (GDP) helps to better understand growth, employment trends, the health of the business sector, and consumer well-being. Current Key Economic Indicators (as of January 29, 2010) Inflation On a seasonally adjusted basis, the CPI-U increased 0.1 percent in December 2009 after rising 0.4 percent in November. The index for all items less food and energy rose 0.1 percent in December after being unchanged in November. (January 29, 2010) Employment and Unemployment U.S. nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent. Employment fell in construction, manufacturing, and wholesale trade, while temporary help services and health care added jobs. (January 8, 2010) Real GDP U.S. real gross domestic product (real GDP) increased at an annual rate of 5.7 percent in the fourth quarter of 2009 (from Q3 to Q4). In the third quarter, real GDP increased 2.2 percent. (January 29, 2010) Federal Reserve The FOMC will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. (December 16, 2009) The size of the US. economy increased at an annual rate of 5.7 percent in the fourth quarter of 2009. The economy is growing and prosperity just around the corner. Right? Read more about the Q4 2009 GDP data and decide for yourself: Module 5 Case Reading Retrieved May 17, 2010. Read the above supplement and write a 4-5 page paper on the following questions: 1. What data from the BEA announcement supports the NBER decision that the U.S. is in a recession? 2. What measures did the U.S. government take to increase GDP during this time? 3. Recent GDP Data in Detail Table 1 of the BEA's January 29, 2010 real GDP estimates is a detailed breakdown of the data by sector and specific types of goods and services, investments, and trade, from 2006 through 2009. Go to Table 1 at: www(dot)bea(dot)gov/newsreleases/national/gdp/2010/pdf/gdp4q09_adv.pdf Take a good look at the data. What are the areas of growth and decline? Was the data (growth rates) consistent throughout the period of time? Summarize your interpretation of the data in Table 1. 4. Go to the BEA web page, "National Income and Product Accounts Table, Table 7.1., Selected Per Capita Product and Income Series in Current and Chained Dollars." You can use this page to look at changes in GDP over any selected period of time. Try looking at the changes over the years sine you were born. www(dot)bea(dot)gov/national/nipaweb/TableView.aspSelectedTable=253&Freq=Qtr&FirstYear=2006&LastYear=2008 *This lesson was adapted from the Council of Economic Education. Case Assignment Expectations: Use concepts from the modular background readings as well as any good quality resources you can find from the cyberlibrary or other internet search engines. Pleas be sure to cite all sources within the text and provide a reference list at the end of the paper. Length: 4-5 pages double spaced and typed. The following items will be assessed in particular: Your ability to understand the different phases of a business cycle.