The State of Todays Economy

Topics: Inflation, United States, Unemployment Pages: 2 (779 words) Published: February 27, 2013
The State of Today’s Economy

The State of Today’s Economy

In most cases the economy is in a state of expansion. The economy is almost always constantly growing due to population change and other factors. However, we must measure the change in growth rate to effectively measure if our economy is contracting or expanding. To measure the growth rate of the economy we measure the positive or negative change in Gross Domestic Product (GDP). We use the GDP from the previous year, subtract this year’s GDP, and then we divide that by this year’s GDP. The United States Commerce Department reported that the United States economy grew at an annual pace of 1.3 percent in the second quarter of 2012 (Lowrey, 2012). Earlier this year the government agency reported a rate of 2 percent and 3 percent at the end of 2011 (Lowrey, 2012). Using this data we can clearly see that our economy is currently contracting. Typically a GDP in the 2-3 percent range is good and will keep inflation in check while allowing the economy to grow at a sustainable pace. According to the website InflationData.com (2012) the current inflation rate in the United States is 1.76%. This number is representative of the low GDP numbers we are seeing. If GDP rises, we can expect inflation to rise. The state of the economy and its contracting can be tied to the unemployment rate that is about 7.7% (Kurtz, 2012). When the economy is in a state of growth, the unemployment numbers should slide in the positive direction. When businesses are profiting and growing they tend to hire more people. Those people come off unemployment and are likely to spend more money in the economy, thus creating more growing opportunities. Once the economy is kick-started, it is cyclical and can have great effects on unemployment, GDP, inflation and interest rates. In a depressed economy, the United States will usually see lower interest rates on all types of loans and sometimes on consumer credit cards. The Federal...

References: Kurtz, A. (2012, December 14). How to Get to 6.5% Unemployment. CNNMoney. Retrieved
from http://money.cnn.com/2012/12/14/news/economy/federal-reserve-unemployment/index.html
Lowrey, A. (2012, September 27). Last Quarter’s Growth Is Revised Down Sharply. The New
York Times. Retrieved from http://www.nytimes.com/2012/09/28/business/economy/last-quarters-growth-is-revised-down-sharply.html?_r=0
Inflation Data. (2012). Current Inflation Rate. Retireved from
http://inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp
Bankrate (2012). Current Credit Card Interest Rates. Retrieved from
http://www.bankrate.com/finance/credit-cards/current-interest-rates.aspx
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