Using the U.S as Country, answer the following questions in essay format. Add so

Question

Using the U.S as Country, answer the following questions in essay format. Add sources if research is performed.

What is the current state of the economy that you have chosen? Collect the latest available data on nominal GDP, real GDP, per capita real

GDP, unemployment rate, inflation rate, interest rates, exchange rate(s), and any other important macroeconomic data.

Is the country experiencing an inflationary gap or a recessionary gap?

What kind of macroeconomic policy should this country follow?

Is the real GDP growing and at what rate?

What is the per capita real GDP on Purchasing Power Parity basis? What is the trend in this variable? Is the per capita real GDP increasing? Can you find the relevant data for the last couple of years or more?

Is the current unemployment rate close to NAIRU? Higher or lower?

At what stage of the Business Cycle is this country presently in? Is there an inflationary or recessionary gap?

What kind of fiscal and monetary policies is this country presently following? Expansionary or contractionary?

What kind of exchange rate policy is this country presently following? Fixed exchange rate or flexible exchange rate?

How is this country’s economy going to perform in the coming years? What does the future look like? Will the unemployment rate and inflation rate change? Why or why not?

Explanation / Answer

According to the data information released by the Bureau of Labor Statistic and the Bureau of Economic Analysis, we could express that the US economy is presenting a kind of a recessionary gap due to the fact that registered a low rate of growth in the first three months of the year, showing a rate of 0.8% in real GDP during the first quarter from a 0.5% reached in the first quarter of the previous year.

However, statistical data shows that real GDP have been presenting a slow start during the first quarter followed by a better second quarter for the last two years. Nevertheless, it is important to know this low rate of growth represents a better result than estimations released during the last of 2015.

The consumer spending variable shows an increase along the first quarter, acting as a key component in the growth of the economy. In the same time the Federal Reserve has been applying as a monetary policy a discreet raise in interest rates which has influenced in an appreciation of the US dollar. Also, as part of a flexible exchange rate system, a contraction in the amount of dollars in the international financial system generates an increase in the demand of dollars, motivated in addition by the rise in interest rates in the US, giving as a consequence an important appreciation of the dollar in the currency market, which also contributes to maintain the purchase power parity of the us economy compared to other economies.

Another important issue is that the falling in oil prices and the appreciation of the dollar are the main two factors that are going to adjust the performance of the economy for the entire 2016. The falling prices of oil and commodities are going to stimulate an increase consumer spending in the other quarters of 2016.

On the other hand, a rise in the value of dollar also contributes to an increase in import of good products due to that fact they become relatively cheaper related to local goods. This scenario affects directly to local exports as a consequence of an appreciation in the exchange rate compared to others.

With no crisis and disaster in sight for the following quarters, the US economy should be growing, maybe better that latest estimations, focused on an increase in the consumer spending and federal spending, at the time these policies guarantee a rise in the employment level and keep under control the consumer price index. Besides, with the low prices of oil and commodities, the flight of capitals to US markets are going to maintain a rise in the value of dollar.

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