Response To Bernanke
Dear Dr. Bernanke,
All economic indicators point to the fact that the United States has been in a recession for at least a year now. The Gross Domestic Product (GDP), the market value of all final goods and services produced within a country in a given period of time (as defined by Gregory Mankiw in his textbook, “Brief Principles of Macroeconomics”) clearly indicates that the U.S. economy has entered a recession. Consistent with the past three recessions in the U.S. (early 80’s, early 90’s, and 2001-2003), the Real GDP’s growth rate has become increasingly volatile over the past five quarters. In fact, per the Bureau of Economic Analysis (BEA), the GDP has contracted in two of the past four quarters. According to the BEA’s Table 1.1.1 …show more content…
A rising CPI indicates that people are paying more for the things they are buying. Per the Bureau of Labor Statistics (BLS) website, the CPI is the most widely used measure of inflation. Inflation tends to fall during time of economic hardship due to the fact that there are fewer injections of money into a struggling economy, and less money means less inflation. According to the BLS, for the 12 month period ending December 2008, the CPI rose .1%, the smallest calendar increase since a .7% decrease in 1954, indicating that money is not being loaned and “created.” When money is not being loaned or changing hands, an economy is …show more content…
The unemployment rate had remained relatively stable during 2006 and 2007, hovering in the 4.5%-5.0% range. So, this rapid rise in unemployment confirms the nation is facing serious economic problems. As discussed earlier, the GDP and CPI indicate that our economy has been in a recession since December 2007. And upon closer study, the 2008 monthly unemployment rates do not start to steeply incline above the 5% threshold until May 2008, a few months after the start of the recession. This is consistent with unemployment being a lagging indicator of the
All economic indicators point to the fact that the United States has been in a recession for at least a year now. The Gross Domestic Product (GDP), the market value of all final goods and services produced within a country in a given period of time (as defined by Gregory Mankiw in his textbook, “Brief Principles of Macroeconomics”) clearly indicates that the U.S. economy has entered a recession. Consistent with the past three recessions in the U.S. (early 80’s, early 90’s, and 2001-2003), the Real GDP’s growth rate has become increasingly volatile over the past five quarters. In fact, per the Bureau of Economic Analysis (BEA), the GDP has contracted in two of the past four quarters. According to the BEA’s Table 1.1.1 …show more content…
A rising CPI indicates that people are paying more for the things they are buying. Per the Bureau of Labor Statistics (BLS) website, the CPI is the most widely used measure of inflation. Inflation tends to fall during time of economic hardship due to the fact that there are fewer injections of money into a struggling economy, and less money means less inflation. According to the BLS, for the 12 month period ending December 2008, the CPI rose .1%, the smallest calendar increase since a .7% decrease in 1954, indicating that money is not being loaned and “created.” When money is not being loaned or changing hands, an economy is …show more content…
The unemployment rate had remained relatively stable during 2006 and 2007, hovering in the 4.5%-5.0% range. So, this rapid rise in unemployment confirms the nation is facing serious economic problems. As discussed earlier, the GDP and CPI indicate that our economy has been in a recession since December 2007. And upon closer study, the 2008 monthly unemployment rates do not start to steeply incline above the 5% threshold until May 2008, a few months after the start of the recession. This is consistent with unemployment being a lagging indicator of the