Gross domestic product (GDP) is a widely used indicator of the economy, producing goods and services, which shows the rate of overall economic development of the country. It gives an idea of the overall material well-being of the nation, because the higher level of production, the higher is a country’s welfare.
GDP as an macroeconomic indicator is very important for the economy as a whole, as it is used to describe the results of production, economic development, economic growth, analysis of labor productivity in the economy and so on. That is, based on the data about the GDP in the USA it is possible to get a clear vision of what the economy may look like based on recent history and expected future conditions.
The aim of this paper is to consider the GDP as a major indicator of the U.S. economy. The main objectives are to learn key concepts of GDP, to analyze the dynamics of GDP in the U.S. in recent years, and forecast an expected rate of economic growth in the coming years, based on GDP.
Gross domestic product (GDP) as an indicator of the economy
GDP is defined as the amount of domestically produced final goods and services, that are goods and services used for final consumption, with the cost of intermediate goods and services purchased and used in manufacturing, GDP is not included. Thus, GDP can also be defined as gross value added, where added value characterizes the contribution to the cost of products produced. Since the most part of the final product is consumed by households, and the accumulation ensures economic development, GDP is used as an index characterizing the level of welfare.
Gross domestic product is the main indicator, based on which are determined the level and rate of economic development of the country. An increase in GDP is usually accompanied by increased employment and improved living standards, resulting in increased consumption of goods and services. Periods of economic growth can be replaced by decline in production, in employment, lower GDP per capita and hence lower living standards. However, if we consider the development over long periods, it is clear that the basis for improvement of living standards is the increase in production of goods and services, that is overall GDP and GDP per capita.
The major factors of GDP growth are involved in the production of additional resources, primarily additional physical capital and labor, as well as an increase in factor productivity as a result of technological progress, the use of more productive technologies and training workers. Thus, the increase in the use of resources is an important factor in GDP growth. However, much of its growth is achieved through technological progress, allow to produce new types of products, improve the quality of traditional products and make better use of resources used.
Dynamics of GDP of the USA in 2009-2011
Let us now consider the dynamics of change in U.S. GDP over the past two years, during the period of economic recovery after the crisis. So, after the economic crisis and a prolonged recession, the first time since December 2007 the U.S. economy has shown growth in the third quarter of 2009, supported by governmental financial incentives in consumer spending and housing construction. Thus, in late 2009 the U.S. government announced the end of the largest for the past eighty years of recession in the U.S. economy.
We must pay attention to the fact that the growth of the world’s largest economy was stronger than economists expected: U.S. GDP at the end of 2009 rose by 3.5% year on year, against the forecast of 3.2%, according to the Commercial Department of the United States of America.
It is also important to note that in 2009, the International Monetary Fund (IMF) released a list of 10 largest economies in the world in terms of GDP. The first place for decades belongs to the United States, which size of the economy was about $ 14.26 trillion. Next were coming Japan ($ 5.07 trillion) and China ($ 4.91 trillion), respectively. Thus, the U.S. is a leader in the state and economic development throughout the world, according to the level of GDP.(EconPost 2011)
According to the chart, provided by the Bureau of Economic Analysis, we can see a steady growth of the US economy during 2010 and at the beginning of the 2011. According to the official data, the country’s GDP for 2010 showed an increase of 3, 1% to $ 14.72 trillion, and in 2011 it is expected to grow about 2%. (Bureau of Economic Analysis 2011)
As for the latest data, the Gross Domestic Product (GDP) in the United States expanded 2.3 percent in the first quarter of 2011 over the same quarter, previous year. (Bureau of Economic Analysis 2011)
Federal Reserve (Fed) has forecast growth in real U.S. GDP for 2011 of about 2.7-2.9%. In 2012, the Fed expects the U.S. economy to 3.3-3.7%, and the Central Bank also lowered the forecast, as previously it was assumed a raise about 3.5-4.2%. In 2013, the rise of GDP is likely to be from 3.5% to 4.2%, and in the long term to stabilize at 2.5-2.8%. (The Federal Reserve System 2011)
Bureau of Economic Analysis (2011). “National Income and Product Accounts : Gross Domestic Product: Second Quarter 2011 (Advance Estimate)”. Retrieved from: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
“Top 10 world economy ranking”. EconPost, February 21, 2011. Retrieved from: http://econpost.com/worldeconomy/world-economy-ranking
The Federal Reserve System. (2011). “Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents”. Retrieved from: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20110622.pdf