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Gdp Growth, Recessions And Cycles Essay

1848 words - 8 pages

The purpose of the data exercises is to ensure that you are familiar with the methodology of collecting data from the web and analyzing it. These exercises include collecting the required data, creating a graph or table to present this information, and two to three double-spaced pages of analysis of the data - GDP growth: recessions and cycles.
GDP Growth: Recessions and Cycles
Figure 1 - US Real GDP 1930 – 2014 with 2009 as the Base Year

Source: (Shiller, 2015); (Federal Reserve Bank of St. Louis, 2015)
Figure 1 above shows the real Gross Domestic product (GDP) of the United States for the years 1930 to 2014. Real GDP is essential and important as it shows the general soundness of ...view middle of the document...

Thus, it is evident that the economy has experienced recessions in 1980, 1982, 1991, 2001 and 2007. Since the year 1980 the economy has experienced five economic cycles as inferred from table 1 below. However, the great depression of 2007 to 2009 was the biggest since the thirties great depression (Shiller, 2015).
Table 1 - Business Cycles since the 1980
Turning Point Date Peak or Trough Announcement Date with Link
Jun-09 Trough 20-Sep-10
Dec-07 Peak 1-Dec-08
Nov-01 Trough 17-Jul-03
Mar-01 Peak 26-Nov-01
Mar-91 Trough 22-Dec-92
Jul-90 Peak 25-Apr-91
Nov-82 Trough 8-Jul-83
Jul-81 Peak 6-Jan-82
Jul-80 Trough 8-Jul-81
Jan-80 Peak 3-Jun-80
Source: (National Bureau of Economic Research, 2015)
Another way to analyze the GDP is through the use of the annual growth rate of the same. Figure 2 below indicates the growth rates of the American GDP from the nineteen thirties to the year 2014. From looking at the graph it is easy to identify the periods of recessions and expansions as indicated by the growth rates trend. For example, in the year 1943 the real GDP growth rate was at its highest and stood at approximately 78%. Since then the growth rate has hit other highs in the early fifties, mid –sixties, mid-seventies, early eighties and mid-nineties amongst others (Shiller, 2015).
All these highs are accompanied by their relevant lows or troughs and hence show the various business cycles in the American Economy. For example, during the recent great depression of 2007 the GDP growth rate was negative at over –4.4%. As at the third quarter in 2014 the real GDP growth rate stood at 2.43%. Most notable however, is how the real GDP growth rate has transformed since the mid-thirties. However, the great growth rates experienced just after the great recession of the early thirties and during world war two have never been matched.
Figure 2 - Real U.S. GDP Growth Rateswith 2009 as the Base Year

Source (Shiller, 2015); (Federal Reserve Bank of St. Louis, 2015)
Part 2: Income Approach to Calculating GDP

Source: (Bureaua of Economic Analysis, 2015)
GDP is a measure of what is produced within a country’s borders only by both citizens and immigrants. However, Gross National Product (GNP) is a measure of what is produced by a country’s firms and citizens within and without its borders. Therefore, to arrive at the GNP we add what we receive from our citizens abroad and subtract what immigrants pay abroad to their citizenry nations (OpenStax College, 2014). As at the beginning of the first quarter in 2012 the GNP was 16,195 billion dollars while the GDP was $15,956.5 billion. In the third quarter of 2014 the GNP was $17,829.6 billion while the GDP was $17,599.8 billion. It is therefore clear that difference between the GNP and GDP has remained below 1.5%.
National Income (NI) is the value of what domestic businesses and individuals earn. Thus, it is the total of income that is domestically applicable to individuals and businesses (OpenStax...

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