GDP Growth, Matt Kline

Title: US GDP Growth in Fourth Quarter

Posted By: Matt Kline

The United States saw a rise in national gross domestic product, or GDP. GDP is the market value of all final goods and services that are provided within a country, in this aspect, the fourth quarter (September, October, November and December). This is great news for our country, because of the previous recession; there is always a slack in increases of the GDP. A recession is defined as a significant decline of economic activity lasting more than a few months. This is great news because economists only believed for the GDP to close at 3.0 percent, but it finalized at 3.2 percent. The reason for the slack after the most recent recession was because the government tries to stimulate the economy by increasing government spending and cutting taxes. This usually gets us out of a recession, but after the recession, the government usually peaks. We are then in the expansionary phase of the National Bureau of Economic Research (NEBR) cycle phases.

I believe that this is a really good start for our country. We have seen vast unemployment in the past year, and if we can get our economy to turn around, hopefully more jobs are to follow. Our government needs to find a balance of government spending and a steady price with taxes so the consumers are more willingly to spend savings money if they know the economy is stable. This is hard for the United States economy to do alone, because of oil prices in the Middle East, we cannot control their prices, therefore consumers become weary of prices of oil, that would limit our consumers spending and slow down our economic recovery.

The Federal Reserve has also been aware of the rise in economic growth; they played their part by putting more money into circulation, which stimulates demand. They usually buy bonds from the U.S Treasury, which puts more money into circulation. The Federal Reserve can also cut the amount of money that banks must keep on hand, the reserved requirement ratio (RRR). When the make this ratio smaller, then more cash can circulate through the process quicker than when the banks must hold onto more money.

Altogether, the economy expanded at 6.7 percent, the last time that happened was 1998. Consumer spending accounts for almost two thirds of spending grew 4.0 percent in the last three months of 2010. It was much faster than the 2.4 percent rate from 2006. The consumers are a large part of our economy, if they do not spend their money, then the government must spend more to stimulate the people, which still hurts the economy even more.

Hopefully the United States economy can become stable again. After the past year’s results and rises, it seems like we are coming out of a recession and are in the expansion phase. Hopefully it is a slow and long process before we reach the peak of expansion, because after the peak, comes the downfall again. Although we never know how long we could have the economy at its peak, I would rather be continually expanding than at the peak of our abilities.

http://in.reuters.com/article/2011/03/25/idINIndia-55879620110325?pageNumber=2