Written report – U.

S economy

FINAL PROJECT

Lecture: Macroeconomics
Group: United States
Date: 9/18/2019
Ngo Thanh Trung (Peter)
Tong Thi Hieu Ngan (Mary)
Ho Thi Thu (Jenny)
Le Quang Hieu (Harry)
Presenters: Group United States
Written report – U.S economy

CONTENT

Q1: Brief introduction about the chosen country’s economy (both past and
present).................................................................................................... 3

Q2: The condition of the economy (bad or good) and possible cause(s).
................................................................................................................. 5

Q3: Choose one cause (from Q2) that interest you more and
elaborate/analyze the cause with the economic concepts explained in this
course/textbook. ..................................................................................... 7

Q4: Provide suggestion(s) on how the country can improve their economy.
................................................................................................................. 9

Note: APA 6th referencing style

Presenters: Group United States

Written report – U.S economy
Answer:
Q1:
Nowadays
1. GDP: $21.345 trillion (2019 est.)
2. Inflation rate (CPI): 1.8% (251.631)
(Aug. 2019)
3. It is the world's largest economy
by nominal GDP and the second-
largest by purchasing power
parity (PPP)
4. It also has the world's eighth-
highest per capita GDP (nominal) at
$62,606 and the tenth-highest per
capita GDP (PPP) at $60,055 in 2018
5. The U.S. dollar is the currency most
used in international transactions and
is the world's foremost reserve
currency.
6. The U.S. is the world's largest
importer (2,540,805.7 in millions of
U.S dollar) and the second-largest
exporter (1,665,992.0 in millions of
U.S dollar).
7. Labor force by occupation (2017):
- Agriculture: 1.0%
- Industry: 19%
- Services: 80%
8. Labor force
- 163.9 million employees (August
2019)
- 6.0 million unemployed workers
– amounted at 3.7% (August
2019)
- Employment rate was counted for
60.9% (August 2019)
Special events:
Past
1. In 19th century
- The U.S. grew to a huge, integrated,
industrialized economy that made up
around one-fifth of the world economy
- The U.S. GDP per capita converged
on and eventually surpassed that of the
UK
- The United States was largely
agricultural with more than 80% of the
population in farming
- Ample land availability allowed the
number of farmers to keep growing,
but activity in manufacturing, services,
transportation and other sectors grew at
a much faster pace. Thus, by 1860 the
share of the farm population in the U.S.
had fallen from over 80% to roughly
50%.
2. In 20th century
- In 1930: The government
strengthened the economy by
spending heavily itself or cutting
taxes so that consumers would
spend more, and by fostering rapid
growth in the money supply, which
also encouraged more spending.
Presenters: Group United States
Written report – U.S economy
The Great Depression of 1929–39
This was the worst financial and economic disaster of the 20th century. Many
believe that the Great Depression was triggered by the Wall Street crash of
1929 and later exacerbated by the poor policy decisions of the U.S.
government. The Depression lasted almost 10 years and resulted in massive
loss of income, record unemployment rates, and output loss, especially in
industrialized nations. In the United States the unemployment rate hit almost
25 percent at the peak of the crisis in 1933.
The Financial Crisis of 2007–08
This sparked the Great Recession, the most-severe financial crisis since the
Great Depression, and it wreaked havoc in financial markets around the world.
Triggered by the collapse of the housing bubble in the U.S., the crisis resulted
in the collapse of Lehman Brothers (one of the biggest investment banks in the
world), brought many key financial institutions and businesses to the brink of
collapse, and required government bailouts of unprecedented proportions. It
took almost a decade for things to return to normal, wiping away millions of
jobs and billions of dollars of income along the way.

(Nominal GDP Sector Composition, 2016 (in millions of dollars) at current prices)

Q2: The condition of the economy and possible causes:

1. The economy of the United States (Overview):
- The economy of the United States is a highly developed market economy. It is the world's
largest economy by nominal GDP.
- U.S. GDP growth will slow to 2.1% in 2019 from 3% in 2018. It will be 2% in 2020 and
1.8% in 2021. That's according to the most recent forecast released at the Federal Open Market
Committee meeting on June 19, 2019. The projected slowdown in 2019 and beyond is a side
effect of the trade war, a key component of Trump's economic policies.
- The unemployment rate will average 3.6% in 2019. It will increase slightly to 3.7% in 2020
and 3.8% in 2021.
- Inflation will average 1.5% in 2019. It will rise to 1.9% in 2020 and 2.0% in 2021. The core
inflation rate strips out those volatile gas and food prices.

Presenters: Group United States

Written report – U.S economy

U.S. Economic Outlook 2019, 2020, and 2021.

(Chart: The Balance Source: The Federal Reserve)

2. Possible Causes:
a) Positive:
- The nation's economy is fueled by abundant natural resources, a well-developed
infrastructure, and high productivity.
- It is the world's largest producer of petroleum and natural gas.

Presenters: Group United States

Written report – U.S economy
(This is a Graph of countries by natural gas production based on statistics from the
International Energy Agency.)

- In 2016, it was the world's largest trading nation as well as its second-largest manufacturer,
representing a fifth of the global manufacturing output.
- The New York Stock Exchange is by far the world's largest stock exchange by market
capitalization.
- The U.S. has the world's largest consumer market, with a household final consumption
expenditure five times larger than that of Japan.
(Below is a top 20 of the largest consumer markets of the world, according to data from the
World Bank.)

Presenters: Group United States

Written report – U.S economy

b) Negative:
- Unemployment: The unemployment rate will average 3.6% in 2019. It will increase
slightly to 3.7% in 2020 and 3.8% in 2021. Former Federal Reserve Chair Janet Yellen noted a
lot of workers are part-time and would prefer full-time work. Also, most job growth is in low-
paying retail and food service industries. Some people have been out of work for so long that
they'll never be able to return to the high-paying jobs they used to have. Structural
unemployment has increased.
- The projected slowdown in 2019 and beyond is a side effect of the trade war.
Presenters: Group United States
Written report – U.S economy
- Climate Change: The Federal Reserve is taking into account how climate change is
affecting the economy. Research from the Richmond Fed estimated that it will reduce U.S.
economic growth by 30% over the next century.

Q3:

In order to explain the negatively possible causes upon U.S economic growth, Trade
War has been a major contribution since it played a two-sided effect toward an
economy. Especially, the current trade war playing out between America and China
has no clear winner yet, but it has shown a negative result, which not only hurts each
nation’s business but also impacts on global economy as a whole.

The basis of Trade War

A trade war is when a nation imposes tariffs or quotas on imports and foreign
countries retaliate with similar forms of trade protectionism. As it escalates, a trade
war reduces international trade.

A trade war happens when one country imposes protectionist trade barriers on
another country's imports in response to trade barriers put up by the first country.

Critics of trade wars claim they ultimately hurt local companies, consumers, and the
economy.

Presenters: Group United States

Written report – U.S economy
(Chart: Economic sectors hurt by U.S. and Chinese tariffs)

Tariffs are supposed to give a competitive advantage to domestic producers of that

product. Their prices would be lower by comparison. As a result, they would receive
more orders from local customers. As their businesses grow, they would add jobs.
This has partially explained the expectation of increasing inflation rate in U.S
economy in the future.

Macroeconomics impacts – How trade war influences on U.S economic growth.

Countries facing new tariffs, including the United States, experience declines in real
exports and GDP. Not surprisingly, the United States experiences the largest decline
in real imports of goods and services. Compared with the baseline level, real US
imports fall 4.5% in 2020. Due to the high import content of its exports, China also
experiences a significant drop in real imports, which fall 3.2% below the baseline in
2020.

U.S.-China trade happens in the web of a global economy where purchased goods are
made and sold through several different countries before reaching their final
destinations. When the U.S. puts tariffs on China, the world’s largest manufacturing
hub, it will likely affect many other countries, products, and companies that rely on
this global supply chain.

Research from the Peterson Institute for International Economics shows that in an
industry like computer and electronics products, for example, mostly non-Chinese
corporations who operate in China supply 87% of the products that will be affected
by the tariffs, while Chinese firms send only 13%.

A study by the Federal Reserve Bank of San Fransisco in 2011 showed that for every
dollar spent on an item labeled “Made in China”, 55 cents went to services produced
in the United States. This is yet another example of how raising tariffs and starting
trade wars in a global economy might come back to hurt U.S. businesses and
consumers. From this point, we can claim that the fall in U.S GDP is true when
domestic business loses their interests and at the same time customers have to “share”
higher taxes by purchasing products at a higher price and more expensive imported
items.

In a further escalation of the ongoing trade war, President Donald Trump on Friday
“ordered” American companies to find alternatives to manufacturing in China,
including “bringing your companies home,” following that US President Donald

Presenters: Group United States

Written report – U.S economy
Trump tweeted on Saturday that there is a simple solution: “Just make the products in
the US where there’d be zero tariffs.” Not all the firms would follow this act
immediately, however, there may be a challenge for domestic labor force when USA
can no longer use cheap labor in China. This means that, if the U.S had to pay more
wages for American labor, along with the adjustment in jobs, the quantity of money
supply would rise. Based on the Classical theory of Inflation in Macroeconomics,
when the quantity of money supple shifts price level to a higher stage, the inflation
occurs. As a consequence, in this scenario, Trade was has ultimately influenced on
U.S inflation rate.

Q4 (Bonus question):

I. Problem in US economy : USURY.

1. Where does usury come from ?
- Credit is the ability of a customer to obtain goods or services before
payment, based on the trust that payment will be made in the future. It is
the lifeblood of America’s economy. The system is based on the ease
with which one can borrow money.

- When using a credit card, buyers can shop and spend money freely
without having to pay immediately. They can debit and will pay these
bills when due.

- Because there is no payment at the time of transaction, it is very difficult

for users to control the amount of money they have spent and be aware
of their financial status.

- Due to the repayment of the debts they have recorded, it is likely that
they will not have enough money to pay and need to mortgage the
property or delete the debit card until they pay off the old debt. And of
course no one wants to lower their houses or valuable assets.

- At this time, the fastest and most effective solution is to borrow interest
or in other words, borrow a loan with interest. They will borrow money
from an individual or a group of people at a higher interest rate, even
many times higher than the interest rate at the bank.
Presenters: Group United States
Written report – U.S economy

- Lenders often take advantage of the weakness of the borrower that they
are in desperate need of money to push interest rates up very high.

2. How does it effect on national economy ?

- The set lending rates often exceed the limits prescribed by law so the
debts generated from these are often illegal debts, and adversely affect
the overall economic situation.

- The borower will have the immediate benifit because they have money
without waiting so long. But they don’t know that a huge debt will be
born from a small amount of money.

- If we see from a wider vision, it not only harms to the borrower, but also
harms to the nation’s economy. The main core factor in econony is
human. When human in it have to pay the debt which is exponentially
bigger day by day, this economy with the debt everywhere will never
become better.

- Interest rate exceeding threshold will make it difficult to calculate,

synthesize and predict the future situation. Moreover, being able to
easily borrow loans will cause people to slip further into the debt mire.
The “mother debt” will bear “child debt”, once it is borrowed, it will
take a long time to write off the debt. The national economy is not
obligated to pay these debts but it is a burden and a constraint to
economic development. A country wants to develop, the first thing to do
is to minimize the debt as much as possible.

II. Suggested solution

1. To solve the problems and improve the economy, the US gorvement
need to enact a law which ban the illigal loan or in other world is
rejecting the Criminalize usury. Criminalize usury is the most harmful
factor to the economy and when we have a law to prevent them, the
overall economy will turn better and better.

Presenters: Group United States

Written report – U.S economy
2. Beside the law on usury, the government and the financial community
need to limit the amount of debt that users can write when using a credit
card. In other words, only give users a limited amount of money suitable
for the current economic situation.

3. For banks, should tighten the terms when customers want to open a
credit card. Make sure that their current financial capacity is sufficient to
open a credit card and that there are additional provisions on being
responsible for their debit bills.

Presenters: Group United States

Written report – U.S economy

REFERENCE
Question 1:

- Bondarenko, P. (n.d.). 5 of the World's Most Devastating Financial Crises. Retrieved from
https://www.britannica.com/list/5-of-the-worlds-most-devastating-financial-crises
- Amadeo, K. (2019, August 6). Protect Yourself from the Next U.S. Economic Crisis.
Retrieved from https://www.thebalance.com/u-s-economic-crisis-3305668
- Financial crisis. (2019, September 4). Retrieved from
https://en.wikipedia.org/wiki/Financial_crisis
- Economy of the United States. (2019, September 17). Retrieved from
https://en.wikipedia.org/wiki/Economy_of_the_United_States#19th_century

Question 2:

- Amadeo, K. (2019, August 27). What Will the Economy Do in 2019 and Beyond?
Retrieved from https://www.thebalance.com/us-economic-outlook-3305669
- Economy of the United States. (2019, September 16). Retrieved from
https://en.wikipedia.org/wiki/Economy_of_the_United_States
- List of countries by natural gas production. (2019, September 7). Retrieved from
https://en.wikipedia.org/wiki/List_of_countries_by_natural_gas_production
- (n.d.). Retrieved from
https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20190619.htm

Question 3:
- A quick guide to the US-China trade war. (2019, September 2). Retrieved from
https://www.bbc.com/news/business-45899310
- Berstein, J. (2019, August 22). How Would a Trade War Affect You. Retrieved from
https://www.investopedia.com/insights/how-would-trade-war-affect-you/
- To make better decisions, you need to see the big picture. (n.d.). Retrieved from
https://ihsmarkit.com/solutions/us-china-trade-war-impacts.html
- Amadeo, K. (2019, August 13). Why Trade Wars Are Bad and Nobody Wins. Retrieved
from https://www.thebalance.com/trade-wars-definition-how-it-affects-you-4159973
- Trump says US firms 'hereby ordered' to quit China. (2019, August 23). Retrieved from
https://www.bbc.com/news/business-49450245

Presenters: Group United States