Economy of USA

By: Kushagra Sharma [12DCP-057]Prodyot Parashar [12DCP-083]Raj Kumar Singh [12DCP-089]

Introduction

• Consists of 50 districts and a federal district, with Washington, D.C. as its capital.

• At 3.79 million square miles and with over 314 million people, it is the 4th largest country by total area, and 3rd largest by population.

• One of the world's most ethnically diverse and multicultural nations, the product of large-scale immigration from many countries.

• US economy is the largest in the world with a GDP of $ 15.1 trillion.

• Ranks 9th in the world in nominal GDP per capita.

Contd..

• Its currency U.S. dollar ($) is the world's primary reserve currency.

• It is the largest importer of goods and third largest exporter.

• In 2010, the total U.S. trade deficit was $635 billion.

• Canada, China, Mexico, Japan, and Germany are its top trading partners & China is the largest foreign holder of U.S. public debt.

• In 2009, the private sector was estimated to constitute 86.4% of the economy, federal government activity 4.3% and state and local government activity 9.3%.

•World’s largest

• Free Market (Actually mixed economy)Low government regulations

• Impacts world marketsBiggest trading partner to 60 countries

STRUCTURE OF THE ECONOMY

• Highest labour force participation rate139.396 million employed

• US Industry Sectors

• Agriculture 1.2%• Industrial 19.6%• Services 79.2%

STRUCTURE OF THE ECONOMY

NATIONAL ACCOUNTS AND MACRO ECONOMIC AGGREGATES

• GDP• GNP• CPI• WPI• Inflation• Unemployment

• IIP• PPI• Exports• Imports• Balance of Trade

Gross domestic product (GDP)

Market value of all officially recognized final goods and services produced within a country in a given period.

Gross domestic product (GDP)

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

10.59 11.0911.80

12.5613.31 13.96 14.22 13.86 14.45 15.09

GDP of USA

Year

GD

P in

Tril

lions

Gross domestic product (GDP) Growth Rate

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

1.83%2.55%

3.48%3.08%

2.66%1.91%

-0.36%

-3.53%

3.02%

1.70%

GDP Growth Rate of USA

Year

GD

P G

row

th R

ate

GROSS NATIONAL PRODUCT (GNP)

Total income earned by the nation’s factors of production, regardless of where located

GROSS NATIONAL PRODUCT (GNP)

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

10.66 11.1411.91

12.7613.63 14.10 14.39 13.94 14.64 15.23

GNP of USA

Year

GN

P in

Tril

lions

GDP COMPARISON

US22%

China11%

India3%

Japan8%

Others65%

GDP(2010)

US32%

China3%

India1%

Others51%

Japan13%

GDP (2001)

INFLATION RATE

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

-1

0

1

2

3

4

5

1.6

2.32.7

3.4 3.22.8

3.8

-0.4

1.6

3.2

Inflation Rate in USA

Year

Infla

tion

Rate

%

UNEMPLOYMENT RATE

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

2

4

6

8

10

12

5.8 6 5.5 5.1 4.6 4.65.8

9.3 9.69

Unemployment Rate in USA

Year

Une

mpl

oym

ent R

ate

%

WHOLESALE PRICE INDEX (WPI)

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 20000

20

40

60

80

100

120

140 127.73117.37

109.85120.45

109.69 104.67 10093.18 87.75 83.3 85.26 84.32

WPI of USA

year

wpi

INTERNATIONAL INVESTMENT POSITION (IIP)

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

-4,500,000

-4,000,000

-3,500,000

-3,000,000

-2,500,000

-2,000,000

-1,500,000

-1,000,000

-500,000

0

-4,030,250

-2,473,599-2,321,770

-3,260,158

-1,796,005-2,191,653

-1,932,149-2,253,026-2,093,794-2,044,631-1,875,032

-1,337,014

I IP of USA

Year

IIP

PPI

HUMAN DEVELPOMENT INDEX (HDI)

HUMAN DEVELPOMENT INDEX (HDI)

Human Development Index for USA

YearHuman

Development Index (HDI)

Life expectancy at

birth

Mean years of schooling

Expected years of

schooling

Gross National

Income (GNI) per capita

GNI per capita rank minus HDI

rank

Non Income HDI

2011 0.910 78.5 12.4 16.0 43,017 6 0.931

HUMAN DEVELPOMENT INDEX (HDI)

2000 2005 2006 2007 2008 2009 2010 20110.89

0.895

0.9

0.905

0.91

0.915

0.897

0.9020.904 0.905

0.907 0.9060.908

0.91

HDI for USA

Year

HD

I

Exports

Imports

Balance of Trade

Recent Fiscal and

Monetary Policy

Fiscal Deficit

$1.3 Trillion

Fiscal Deficit

More than 8% of GDP

Fiscal Deficit

Close to the 1930’s Deficit

US Borrowings

From Bank And InvestorsFrom Foreign GovernmentsFrom World Bank

US Borrowings

Measures

Monetary policy• Fed responded to the problems by reducing the federal funds target

and the discount rate.• Beginning on September 18, 2007, and ending on December 16, 2008,

the target was reduced from 5¼% to a range between 0% and ¼%, where it currently remains.• Purchasing longer-term securities--specifically, Treasury, agency, and

agency mortgage-backed securities--on the open market.

Measures

Fiscal Policy• Deteriorated since the onset of the financial crisis and the recession.

• Congressional Budget Office (CBO) projections :deficit to fall from current 9 percent of GDP to 5 percent of GDP by 2015, but then to rise to about 6-1/2 percent of GDP by 2020.

• To stabilize the ratio of federal debt to the GDP the primary budget deficit must be reduced to 0.4.

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SUMMARY THOUGHTS

•Economic growth signals are still positive and consumption is apparently rebounding, while corporate earnings are strong.

GOOD

BAD

UGLY

Unemployment, Housing, Interest Rates, and Oil all loom as potential caution flags that could reverse the good news story

Government debt and overall debt are not going away as major issues that could reduce long term growth and lead to unpleasant outcomes

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SUMMARY THOUGHTS

•Economic growth signals are still positive and consumption is apparently rebounding, while corporate earnings are strong.

GOOD

BAD

UGLY

Unemployment, Housing, Interest Rates, and Oil all loom as potential caution flags that could reverse the good news story

Government debt and overall debt are not going away as major issues that could reduce long term growth and lead to unpleasant outcomes

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Conclusion

• The U.S. economy will be firing on more cylinders in 2011• Net exports will contribute to growth and housing will (hopefully) stop

being a drag by mid-year; nonresidential construction has turned the corner• The pace of consumer spending has also accelerated, thanks to a gradual

improvement in the employment outlook and diminished worries about a double-dip• By far the best news is that business optimism is the highest in three years

and cash flow remains very strong• The Obama-Republican tax package will add around 0.6 percentage point

to growth in 2011, but much of the recent rebound is not stimulus related • Don’t expect any significant action on the deficit until after 2012• Bottom line: growth in the next few year swill average 3% to 3.5%

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Thank You