Wednesday, March 18, 2009

Accuracy of The USA GDP

Overall, the GDP provides a general description of the size of the US economy. What part of the economy is not being represented in the GDP? What impact might this have on measuring the US output? Find out what the experts think and cite your source.
www.businessweek.com

13 comments:

  1. GDP provides a general description of the size of the US economy but is not being represented in items exported out of the U.S. This could impact the U.S output because we are actually making more than we estimate. I don't see how this could damage the economy but it helps because we will have more money in our economy than we estimate. We get money for the products we sell to other countries.

    http://www.sparknotes.com/economics/macro/measuring1/section1.html

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  2. One major part of the economy that is not being represented is the unemployment rate. "The nation's unemployment rate bolted to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs." As of March 6, 2009, the unemployment rate in the United States was around 8.1 percent. In reality, you need to add a 3 - 5 percent markup to account for the many who do not actually file for unemployment status. This is the problem with statistics, they don't really prove anything one way or another. Because you can manipulate the data to portray whatever you want. In this case, the government is not releasing that info to keep the public's panic level lower, or simply that they have no clue what the real number could be.

    This could have a major impact on U.S. output. With millions of people not in the work force, companies have to cut down on the product being produced. Cutting back on either the quantity or quality of the products they make. In many cases, both. This could have a major effect in the eyes of the world who buy our products. They see that the items they are buying are limited in supply which raises prices, but the quality of the product is so poor that other nations won't want to buy the product. This then perpetuates the situation and makes us sink further and further into debt.

    http://www.topix.com/us/2009/03/unemployment-rate-soars-to-8-1-percent

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  3. The part of the economy that is not represented in the GDP is the unemployment rate because it keeps getting raised 3 to 4 percent every year and the GDP does not include that in there total. The impact that it has on measuring the US output is that if we people are unemployed they can't make products and goods and that affects the GDP dramatically because GDP is the output of all final goods but if there are not enough final products how will they have a good GDP rate? I think that the GDP definitely has to include the unemployment rate because then it will be clear why our GDP are so low like it is right now. Right now our GDP rate is very low and it shows that the economy is shrinking. In October, the GDP fell at an annual rate of 0.3%. A bad GDP basically means that we are in recession. Unemployment is a huge factor in that decrease because since the unemployment rate has gone up, goods are not being made which ultimately affects the GDP. The US output has to include the unemployment rate as I said before because it is a huge factor in counting the GDP. That is the biggest factor and I can't really think of any more because it all comes down to businesses losing business and employees.

    "The more important measure for employment is the difference between real GDP and a theoretical real GDP which economists use to calculate the maximum output of an economy. When the gap between real GDP and maximum output GDP is large, the unemployment rate will be large and vice versa". - Wikipedia

    The unemployment rate is really bad in the US right now and if it does not go down then we will be in a really bad economy because the unemployment rate could reach 20% which will be insane because won't be making money or goods and then the GDP will be the worst in history and our country will be embarrassed. A change has to happen.

    http://www.businessweek.com/bwdaily/dnflash/content/dec2008/db20081212_666543.htm

    http://en.wikipedia.org

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  4. "Figuring out the size of the U.S. economy is a tricky task." One part of the economy that is not represented in the GDP is employee training. Education, and human capital are also not counted in the GDP. "Government and personal spending on education is mostly put into the consumption bin." The consumption bin includes everything that a person or country sees as important, something you can't live without. Items that can be used in the greater future, food is an excellent example of what goes into the consumption bin. "A big portion of the long-term output of American companies isn't being counted as part of GDP at all." Not counting everything that should be put into consideration could lead to disastrous effects. Since the GDP does not represent all parts of economy, we as a country could be spending money we don't have. Therefore putting us all in danger of debt. I agree with what Mike and Aaron said, I also feel that the unemployment rate needs to be included in the GDP. Since these people are unemployed we are losing millions of dollars to pay for their unemployment. The economy does not take this into consideration for the fear that the people will get scared and there will be chaos in the streets. The unemployment rate has also caused the crime rates to go up. In the last two days there have been 6 police officers killed on duty. Events like these usually occur when the situation gets as bad as it is now. The unemployed people have no money so they follow a life of crime in order to pay the bills. "...a request to appropriate $50 million from the stimulus for unemployment insurance benefits. "We don't want to obligate the state beyond what's necessary," Williams said. These people do not want to pay for the unemployed because they see no point in doing it.
    http://www.businessweek.com/ap/financialnews/D9713D5O0.htm
    Glencoe, Economics: Today and Tomorrow, pg.346

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  5. The third quarter real gross domestic product figure was revised downward to a 1.1% decline from the previously reported 0.4% decrease.

    The important PCE price index fell 0.3% (vs -0.4%). Adjusted for September 11 insurance flows, third quarter PCE was up 0.9%, and as a marker for the real Fed funds rate (+1.1%) suggests that the Federal Reserve still may have some work to do if it wants to employ negative real rates for a period.

    Most of the major aggregates were revised lower, with the one exception being investment spending, which was revised to a 9.3% decline from the previously reported 11.9% decrease. As expected, the biggest downward revision was seen in net exports, as import growth was revised to a decline of "only" 12.9% from the previously reported 15.2% drop, while exports were revised to a 17.7% decrease from the previously reported decline of 16.6%.

    There are now less jobs due to the recession and the jobs that had to do with exporting goods aren't selling as much. That means less money is coming into the US and we have less money. There is less investment money being spent now because people are scared that businesses will crash. That leads to businesses losing money and having to go bankrupt. "As expected, the biggest downward revision was seen in net exports, as import growth was revised to a decline of "only" 12.9% from the previously reported 15.2% drop, while exports were revised to a 17.7% decrease from the previously reported decline of 16.6%. " Products being exported decreased more than products being imported. That means we are buying more things from other countries than we are selling. This could become a major problem and we need to start exporting more to keep the two balanced.

    http://www.businessweek.com/investor/content/nov2001/pi20011130_3271.htm

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  6. Robertino1,Kyle L1March 30, 2009 at 9:38 PM

    A major part of the economy that is not being represented is the unemployment rate. It always increases but it is not included in the total of the unemployment rate. The nation's unemployment rate rose to about 8.1 percent since February as there are many companies laying of their employees because of this bad economy. This number is not the actual percentage of people that are unemployed it is only an estimate. There are still many people that do not file unemployment in this country and some that are illegally employed. so that number is only an estimate of what the government wants to believe.

    This is a major impact on measuring the US output because while there are many people jobless and companies making layoffs, there will be no need for many products since many peoples standard of living will change. a lot of people are taking away many products they think are not really needed in order for them to save money. In order for producers to produce many of their products for the amount of people that need it they need to know how many people are unemployed.

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  7. The Gross Domestic Product measures the value of economic activity within a country. Strictly defined, GDP is the sum of the market values, or prices, of all final goods and services produced in an economy during a period of time.

    Most of the major aggregates were revised lower, with the one exception being investment spending, which was revised to a 9.3% decline from the previously reported 11.9% decrease. As expected, the biggest downward revision was seen in net exports, as import growth was revised to a decline of "only" 12.9% from the previously reported 15.2% drop, while exports were revised to a 17.7% decrease from the previously reported decline of 16.6%.

    There are 3 sources of bias in the measures of price changes. One is new goods bias which is the fact that new goods keep replacing old goods and these new goods often are more expensive. The quality change bias results from many goods undergoing improvements in quality over time. And the substitution bias is a problem with the CPI.
    Also, a second major reason for concern about the accuracy of our measures of inflation is that they are used to adjust nominal GDP to real GDP, and hence to estimate real economic growth. A one to two percent upward bias in estimated inflation entails a corresponding downward bias in estimated real economic growth. Thus, the implication here is that real growth is probably higher than implied by the official statistics.

    sources:
    http://econ.la.psu.edu/~dshapiro/l09sep25.htm
    http://www.sparknotes.com/economics/macro/measuring1/section1.html
    http://www.businessweek.com/investor/content/nov2001/pi20011130_3271.htm

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  8. The latest GDP data dovetails with the recession that has already been called by the NBER and should come as little surprise to the market.

    The economy likely was in even worse shape in the final three months of last year than the government previously thought, and probably isn't doing much better now.

    Wall Street economists predict gross domestic product, the total value of goods and services produced within the United States, contracted at an annualized rate of 6.5 percent in the October-December quarter. That would be weaker the government's previous estimate of a 6.2 percent annualized drop, which already was the worst in a quarter-century.

    If analysts' forecasts are correct, it would mark the worst showing since a 7.8 percent annualized decline in the second quarter of 1980, when the country was suffering through a severe recession.

    To brace the economy, the Fed has slashed a key bank lending rate to an all-time low and has embarked on a series of radical programs to inject billions of dollars into the financial system.

    The Obama administration is counting on a $787 billion package of increased government spending and tax cuts, a financial-bailout program and an effort to stem home foreclosures to help turn the economy around.

    http://www.businessweek.com/ap/financialnews/D975LEC80.htm

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  9. GDP, otherwise known as gross domestic income is one of measures used to find a nation’s income and output for their total economy. Ever since Truman’s presidency in 1940, our GDP in ratio to debt, has significantly risen from 50% to 80% for President Obama. (http://zfacts.com/p/318.html) Meaning that a large portion of our GDP is our extreme debt, $10 trillion that is, and it’s going to take a lifetime to pay it off. Unfortunately we aren’t even close to tackling that problem, “the United States will experience continued job losses and a falling GDP for several more months” (Forbes), because without jobs, comes no money to spend on our national GDP. Romer, head of White House Council of Economic Advisors, even remarked, “We know that the numbers on GDP are almost surely going to be very bad for this quarter and next”, letting us all know that the near future isn’t going to get any better. Since, the GDP, isn’t highly looked upon now, it can be deduced that our economy isn’t doing so well, and that recovery isn’t going to bring it up any time soon. The bailouts that Obama is dealing out are not only delaying the inevitable, but adding more to our national debt, thus bringing down our future GDP. Perhaps he should figure out a way to address the failing job market, while letting self-destructing businesses die off, so our funds could go to other much-needed places. We should make it survival of the fittest in the business world in order to finda way to cut off a wound feeding more debt to our economy.


    http://www.forbes.com/feeds/afx/2009/04/14/afx6287070.html

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  10. The GDP isn't representing the used and resold items. It also doesn't represent workers who aren't on a pay roll or those who are trading labor for goods. So there is an allowed error taken from the GDP to represent these areas.

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  11. Anabel, Hayley P 1April 28, 2009 at 8:44 AM

    GDP is the total market value of all final goods and services produced in a country in a year. The part of the economy that is not being represented is unemployment. "The consumption bin includes everything that a person or country sees as important, something you can't live without. Items that can be used in the greater future, food is an excellent example of what goes into the consumption bin." Since these people are unemployed we are losing millions of dollars to pay for their unemployment. We as tax payers are paying extra for their unemployment check and their taxes. We also pay off any debt that they can't pay off.

    http://www.businessweek.com/investor/content/nov2001/pi2001

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  12. The GDP, or gross domestic product, is defined as the total dollar value of all final products and services over the course of a year for a nation. The part of the economy that does not represent the GDP is the sale of used goods. Used good sales is not part of the GDP because "such a sale is not due to the production of the nation, but only transfers an existing product from one owner to another". This has a impact on measuring the US output because when you don't include the sale of used goods, the measurement of US output will be a lot less than if the GDP included the sale of used goods. When I searched "accuracy of GDP", this is the closest quote I found: "Given this [market] indicator's past accuracy in predicting economic contractions, many investors believe a recession is near and corporate profits will deteriorate."'

    Glencoe Economics Today and Tomorrow, Chapter 13
    http://www.businessweek.com/investor/content/feb2007/pi20070209_878986.htm

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  13. GDP is the gross domestic production of a country. Exported goods and goods made outside of the country are not accounted as part of the country's GDP. For example, foreign cars that are imported and sold in the U.S. are not accounted as part of the country's GDP. GDP is made up of consumer spending, gross investment, government spending, and net exports. It is better to consume goods and services from the U.S. to increase its GDP rather than from other countries.

    http://en.wikipedia.org/wiki/Gross_domestic_product

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