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ECON 120 United States Economic Forecast Essay

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Economics 120
4-2-16
United States Economic Forecast
A prediction of the course of the United States Economy involves an analysis of
historical data to establish a correlation with current trends. The following economic indicators
can be used to forecast possible scenarios regarding the future state of the economy: interest
rates, price levels, unemployment rates, GDP growth rates, and levels of exports and imports.
Analyses of the previous variables reveal the economy can improve, become worse, or remain
unchanged in a year from now.
The Federal Reserve in response to signs of vulnerability in the U.S. economy left
interest rates unchanged between 0.25% and 0.5% for the third time during its April 2016
meeting. The target of the federal funds rate is determined by meetings held by the Federal Open
Market Committee (FOMC) and can either increase, decrease, or remain unchanged depending
on existing economic conditions in the U.S. Despite the Fed’s decision to leave interest rates
unchanged, the job market and inflation are experiencing an improvement. Therefore, a rate hike
is inevitable and going to take place soon. The target rate has varied considerably over the years.
During the beginning of the 1980s the target rate was as high as 20%, but declined in the
following years to 0% to 0.25% onward in an attempt to stimulate the economy and combat the
Great Recession of 2008-2009. As the labor market and inflation continue to improve the change
of a raise in the interest rate is more probable.experienced improvement, therefore a rate hike is
not far off. not warned of future increase. The economy has been expanding at a moderate pace,
but also noting weakness in business investment.

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The U.S. GDP growth rate, as reported by the Bureau of Economic Analysis, slowed to 0.5% in
the January-March 2016 quarter from a 1.4% expansion in the fourth quarter of last year. The sluggish
growth is regarded as the weakest performance since GDP contracted by 0.9% in the first quarter of
2014.. Variables that contributed to economic weakness were a decline in consumption, business
investments, and exports. Instability in China’s financial markets is partially accountable for the U.S.
economy’s slow start in the first quarter, which was caused by a fear that China was slowing more than
anticipated. Similarly a fall in oil prices, and appreciation of the U.S. dollar, which negatively impacted
American exporters contributed to slow growth as well. Therefore, U.S. imports experienced an increase,
which enlarged the trade deficit. Two other factors responsible is instability in China’s financial markets
and fall in oil prices.Consumer spending, which constitutes 70% of economic activity, fell from 2.4%
from the fourth quarter to 1.9% in the first quarter. Business investment experienced a 5.9% drop in the
growth rate since the 2009 recession as the result of falling oil prices.
The United States is considered to be the second largest importer. An increase in imports is a
factor that contributes to the goods and services deficit. The U.S. purchases more products than it sells.
According the Bureau of Economic Analysis The two main U.S. imports are capital and consumer goods,
which together account for 55% of total imports. Total imports in the United States declined by 3.6% to
$217.1 in March from February 2016. This is labeled as the lowest figure since February 0f 2011. Factors
that contributed to the decrease in import levels are low energy prices, appreciated U.S. dollar, and soft
consumer spending. The United States is the third largest exporter in the word. As of March 2016,
Imports decreased more than exports.

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Economics 120 4-2-16 United States Economic Forecast A prediction of the course of the United States Economy involves an analysis of historical data to establish a correlation with current trends. The following economic indicators can be used to forecast possible scenarios regarding the future state of the economy: interest rates, price levels, unemployment rates, GDP growth rates, and levels of exports and imports. Analyses of the previous variables reveal the economy can improve, become worse, or remain unchanged in a year from now. The Federal Reserve in response to signs of vulnerability in the U.S. economy left interest rates unchanged between 0.25% and 0.5% for the third time during its April 2016 meeting. The target of the federal funds rate is determined by meetings held by the Federal Open Market Committee (FOMC) and can either increase, decrease, or remain unchanged depending o ...
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