Econ 101 Us Econ 2001-2003

Economic Analysis of The U.S. 2001-2003

Economics have many indicators to describe how it runs. The indicators can show if the economy has improved or declined. The economic indicators that will be focused on in this analysis of the United States economy from 2001 - 2003 will be the consumer price index, the imports and exports, the unemployment rate, and finally the gross domestic product. Now while most may know the meanings of the previously stated indicators, for those who don't, they remain useless unless defined. To begin with, these indicators will have to be defined in full to aid in understanding the analysis in more detail. It will be after that that the actual analysis of the economy of the United States from 2001 - 2003 will begin.

The first indicator to be discussed will be the consumer price index. The consumer price index can be described as "a price index that measures the cost of a fixed basket of goods chosen to represent the consumption pattern of individuals" . This is mainly used by the government and private sector to measure the changes of the prices that consumers deal with . Also the reference to basket refers to a collection of items representing a purchasing pattern of a typical consumer. The consumer price index has many components itself such as medical, transportation, household services, rent, durables, non-durables, apparels, food and beverage, and other services . This is relevant to show how much prices have increased from a base year .

Imports and exports weigh heavily on how well an economy could be. Imports are defined as "a good produced in a foreign country and purchased by residents of the "home" country" . For example an import would be as if in the United States were to get some kind of certain product from another country. Exports are defined as "a good produced in the "home" country and sold in another country" . An example of this is if the United States were to sell a product to another country. Ideally speaking, imports should be less then total exports. If the total exports are more then the total imports, that means more money is being received in the homeland, if there is more importing than exporting, that means that the country will be not be gaining from the exports. The United States has a poor import to export ratio, for example, importing way more than the export.

The unemployment rate is as well a very important economic indicator. Obviously unemployed rate is defined as "the fraction of the labor force that is unemployed" . To define the unemployed is important as well, because it refers to those that have no job, but are actively looking for work, not to those who are not working and are uninterested in searching or getting a job . The reason that unemployment is so important in determining the economy's success is because it is intertwined with the gross domestic product, as in when the gross domestic product falls, unemployment is increased, and when it rises, there is a decrease in unemployment . To make what is being explained clearer, when there is unemployment, production is down; therefore there is less money and goods produced out of the economy. This is how unemployment relates as well.

The last indicator to be defined is probably the most the important of them all, and that is the gross domestic product. The gross domestic product is defined as " the total market value of all the final goods and services produced within an economy in a given year" . There are two types of gross domestic product, real and nominal. Real GDP is adjusted to how prices have changed, as nominal GDP is the current price as it is calculated . There is so very much that goes into the gross domestic product that in this analysis only the percent change from the years will be shown as important. A percent that is positive is obviously an increase in the change.

To begin the actual analysis the consumer price index will now be given a look at. In 2001 it can be seen that the annual rate was at 2.8%, which is what the total was for the year . To look at it further reveals more, however. In the initial month of January it was at 3.7% for that month, which is a high total for the month . This was the trend at the beginning of the year; a high consumer price index shows that people are willing to pay more for goods produced. By October, however, it dropped to a low 2.1% affecting how much individuals were willing to purchase, and in affect changing the amount of produced goods . The more people are willing to pay for goods; more money will be set into circulation in the economy. The drop decreased further by the end of the fourth quarter in 2001, ending in December at 1.6% . There was a major difference in the first half as opposed to the second. This has a direct effect on how much goods were being produced, because if people aren't paying what they used to, the producers aren't having the same income and will be producing fewer goods.

The previous decrease of the consumer price index of the later half of 2001 had an obvious impact on the year of 2002. The first two months had a CPI of 1.1%, which is a really low amount . It's highest peak during the first half at 1.6% in April, but again the CPI began to fall . This trend continued all throughout the year with some months slightly up higher, but still relatively low, and eventually it came up to 2% in the month of October . The final month of December had a CPI of 2.4%, ending the final half at a total of 1.9%, which was a decrease from the previous year; the first half was at 1.9% . The annual CPI at the end of the 2002-year was at its lowest in four years, this is clearly a major factor in how the economy was running, the grand total was 1.6% (lowest since 1998 when it was equal) . As previously stated, this has a definite impact on how the individual was making his purchases and how many goods were being produced.

The beginning of 2003 the CPI had kept the same trend that it had in the previous years final quarter, which was showing an upward trend that was one of increasing. January of 2003 the consumer price index was listed at 2.6%, 0.2% higher from the previous month . The next two months stand in equally at 3.0%, which was the highest it had been at since June of 2001 when the CPI was at 3.2%, but it would not remain at such a level . The rest of the year the consumer price index would fluctuate from 2.2% and 2.1% starting in April, and would get to 2.3% by September . The final three months would end up with 2.0%, 1.8%, and 1.9%, making for a low fourth quarter . The final number making the annual amount was at 2.3%, however, as can be seen it was a year that started off at a high number, and regressed to very low totals . This is definitely going to have an impact