Expected Gdp Growth Rate Going Forward

Expected GDP Growth Rate Going Forward

American Intercontinental University

ABSTRACT

This report will analyze the GDP growth over a five-year period. Look specifically at the affect of consumer spending, unemployment, and net exports on the GDP. It will analyze trends to each factor and discuss how each affects the GDP. 

The Great Depression of 2007-2009 was a period of global contraction that caused the world economy to shrink (Investopedia, 2014). There was a 5% reduction in economic activities for G-7 nations, over thirty million people left unemployed, and caused the central banks to introduce massive stimulus programs in an effort to stabilize the global economy (Investopedia, 2014). However, since the Great Recession, the United States economy shows consistent growth. Economist forecast that the economy would continue to grow 3.7% in 2014 and 3.9% in 2015 (Imf.org, 2014).

The GDP, Gross Domestic Product, is an important indicator of economic health. This is revised quarterly and is calculated in one of two ways, the income method, or the expenditure method (CNBC.com, 2011). The income method is calculated by adding up gross profits for firms, total employee compensation, and taxes after government subsidies have been deducted (CNBC.com, 2011). The expenditure method is calculated investments, government spending, total consumption, and net exports (CNBC.com, 2011). Economists interpret the GDP in two ways; a positive GDP indicates economic growth and a negative GDP could be indicative of an oncoming recession. The United States increasing GDP proves this country's resilience.

Annual GDP for the United States was $14,417.9 Billion in 2009 (BEA.gov, 2014). In 2013, the estimated annual GDP is $16,803 billion (BEA.gov, 2014); this is an increase of 16.54% over five years with annual growth rates of 4.58% in 2010, 3.85% in 2011, 3.80% in 2012, and estimated growth of 3.43% in 2013 (Multpl.com, 2014). Several factors influence the GDP, consumer spending the largest contributor, unemployment, and net exports.

Consumer spending increased 9.82% between 2009 and 2013. The largest increase was in 2010 with an annual increase of 3.09% (Tradingeconomics.com, 2014). Consumer spending increased in 2011 and 2012 as well but fell to 2% in both years. Consumer