Macroeconomic Comparison

Topics: Inflation, Unemployment, Macroeconomics Pages: 9 (2597 words) Published: March 22, 2014


A Macroeconomic Comparison of the United States of America and Germany (2002-2012)

Thomas Edison State College

GDP & GDP Growth Rate -

USA:
GDP is an important measure of the health and wellness of an economy. GDP in short is, the total expenditure of an economy through its consumption, investment, government purchases and net exports. According to data release by the world bank, the United States has the largest national GDP on the planet by almost double its next closest competitor (GDP ranking). Using this fact as a starting point, it is logical to say that the United States has had the largest GDP for quite a few years and in-fact the US have been the worlds biggest economy since 1871 (Staff 2).

The visual trend that can be seen in the graph is that the economy experienced fairly steady growth from the early 2000's and then around 2007 we seemed to have leveled off a bit. I believe this to be because of a drop off in the investment component of GDP. Home prices peaked in 2006 and then over the next 5 years began to steadily decline.(Trulia) This decline in one component of GDP caused a stagnation of the growth in GDP that the US was experiencing and in 2009 actually caused the economy to retract.

The retraction that was noted in the previous section is the first thing that pops out in my eyes. It is the only major point on the graph that dips well below the 0 rate. When it is looked at from a statistical point of view it is considered an outlier from the norm, but what caused this retraction? Could it be the result of high unemployment,or the large decreases in interest rates or inflation? The answer is yes, and I will elaborate on these points as we expand our comparison.

Germany:

When we take a look at Germany's chart the first thing we notice is how much less they produce than the US. Germany is known for having some of the most skilled and efficient workers in the world, so why are they not producing more? The reasons for this large difference is in the consumption rates between the countries. US citizens have this want and need to consume and since we have become so accustomed to a growing economy there is always that mindset of “we can afford it.” In Germany it is not like that; people live more within their means and are a bit smarter with their money. Being that consumption is such a large component of GDP this is a major factor for why Germany is so far behind the US.

Germany's growth rate appears to be steady when you exclude the year 2009. Their largest growth occurred in 2010 at ~2%. When compared to the US's growth rate this looks tiny compared to their high of ~6%. When one considers the size difference of the two economies it makes it even more startling. Again as in the US there was a sharp decline in 2009. I conceive that this drop was a reactionary result around the world. Just like during The Great Depression once everyone saw the US economy begin to weaken, other economies got thrown into recession as well. Why can the US have such large steady growth and the German's can not. I believe this is due to a few reasons; the size of our population and therefore our work force is massive compared to Germany's, the size of our nation and in-turn our natural resources needed to make goods is much larger as well.

Exchange Rate -

USA:
The US dollar has historically had a strong exchange rate while also being the most traded currency in the world (Staff 1). Over the 10 years that we are looking at in this paper it is evident that the overall trend is that of depreciation. This chart is compared to a basket of other currencies that include the Euro, Yen, and CAD among others; so it is fair to say that while the US dollar has been depreciating the other currencies in the basket are appreciating. This has both positives and negatives for the US. While the US dollar is becoming less valuable it...

References: Amadeo, K. (2012, January 8). Natural Unemployment Rate. About.com US Economy. Retrieved February 14, 2014, from http://useconomy.about.com/od/glossary/g
Foreign Direct Investment in the United States
GDP per capita (current US$). (n.d.).Data. Retrieved February 11, 2014, from http://data.worldbank.org/indicator/NY.GDP
GDP ranking
Staff 1. (2011, June 6). The 6 Most-Traded Currencies And Why They 're So Popular.Investopedia. Retrieved February 14, 2014, from http://www.investopedia.com/articles/forex/11/popular-currencies-and-why-theyre-traded.asp
Staff 2
Knight, B. (2013, January 1). 'Hartz reforms ': how a benefits shakeup changed Germany. theguardian.com. Retrieved February 14, 2014, from http://www.theguardian.com/commentisfree/2013/jan/01/germany-hartz-reforms-inequality
Mankiw, N
TRADING ECONOMICS | 300.000 INDICATORS FROM 196 COUNTRIES. (n.d.). TRADING ECONOMICS | 300.000 INDICATORS FROM 196 COUNTRIES. Retrieved February 13, 2014, from http://www.tradingeconomics.com/
Trulia, Z
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