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Economics

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I need you to make a paraphrase to these 2 files. Write in deferent way bur it is very impartant to have the same meaning.

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2008, the financial sector crashes, and the economy -on which its weight was over 20%- falls with it. This period has been named by the economists -those who were able to explain the catastrophe only after it happened- as the Great Recession. The indicator which defines a given economic period as a recession (or as an expansion), is the negative growth in real GDP during two consecutive quarters. On the other hand, the indicator which really defines how recessions affect households income (and therefore wealth) is the unemployment rate. Because of those two indicators, economy is said to be recovered, as GDP growth is back to normal rates -those in 2006, and so it is the unemployment rate. What is the unemployment rate, and how is it calculated? In this analysis, we take the unemployment rate as an approach to figure how the Great Recession effects impacted and still impacts economy, and most importantly, households. It is defined as the percentage of population in the labor force who can’t find a job. It is calculated as follows: * Labor force -population eligible for work, who are working or actively seeking for a job. * Employed population -people who has a job. Nevertheless, considering the unemployment itself as a sole indicator to evaluate the labor market’s health may lead to misunderstanding. There are two other indicators which definitely help having a better picture of it. As the unemployment rate is calculated based on the labor force, and the labor force is defined by the population who is actively working or seeking for a job, we should take into consideration the population who simply does not want to work (or… does not want or cannot work legally). This fact is captured by the labor force participation rate, which is defined as -the proportion of the population who is actively participating in the labor force. Healthy economies tend to have higher labor force participation rates as their labor market are more attractive for population. People may be employed, but in which conditions? Another important indicator to take into consideration when analyzing a country’s labor market is the average weekly hours of all employees. This indicator is as important as average wages when determining the quality of the labor market, because it takes into consideration the proportion of employed people who works part-time (non-desirable situation). How the Great Recession affected the U.S. labour market. Because of ‘Great’, all labour market indicators have been affected by the 2007/08 economic crisis. Because of ‘Recession’ the impact has been dramatically negative. In this before and after Great Recession approach analysis, we analyze how negatively this period has impacted the three major labor market indicators. Before the Great Recession, indicators regarding employment in the U.S. were close to optimal levels. With the unemployment rate rounding 4 percent (almost full employment) and labor market participation reaching one of highest levels in history, only the overall labor market was considered to be in good shape. This fairy tale turned into a nightmare suddenly during 2008 and 2009. The unemployment rate skyrocketed to 10% by the end of 2009 -considering that the labor force participation rate also fell by 1% during the same period of time, the real effects of the Great Recession were dramatical for the american labor market. Taking a deeper look on the three indicators considered in this analysis, the situation looks even more terrifying. An unemployment rate of about 10% in the U.S. economy (the most liberalized economy on earth) has dramatical consequences for population, as households are not so protected by government as in other countries. Although many economists, discussed whether this percentage was completely accurate -the argument is that during such a negative economic period, unemerged economy tends to grow-, there is no doubt that many households went bankrupt and had to change their lifestyle for a much more humble one after 7.9 million people lost their jobs. Those lucky enough to have a job, also were affected during this period. Consequence of the tough competition among unemployed population for finding a job, wages decreased sharply, and also did the average weekly hours of all employees. This phenomenon is called distribution of work, and tends to happen during recession periods. For a better picture of the overall U.S. labor market attractiveness during the Great Recession, it is necessary to observe the declining on the labor force participation rate. In the scenario we are analyzing, the market became so negative that many people abandoned the search of official jobs, and -most likely- switched to the unemerged economy as a way to survive to the situation going on during this period. Few months ago, we have reached unemployment rate levels similars to the ones prior the recession (4.4% in December 2016). Nevertheless, we should still remain cautious when claiming that economy has fully recovered -consider that unemployment rate is nothing else but the portion of people who is willing to work, but cannot find a job. Being true that there is less people who cannot find a job than during the Great Recession, there are also less people who are willing to work -or at least to work legally-, what helps unemployment rate remain on low levels. Anyway, U.S. economy seems to be showing strong numbers YoY and recovery seems to keep on track, but is still being too early to understand the economy in terms of employment as it was a decade ago. Durable Goods vs. Real GDP – What features do you observe – Starting in 1999, durable goods were directly correlated with real GDP. When GDP increased, durable goods did as well and vice versa. This indicates that the durable goods indicator is a direct reflection of how the economy is doing. When we are in bad economic times, less durable goods are purchased. We see this exact trend during the 2008 recession when there is a large dip in the real GDP as well as durable goods. During time of recession, consumer confidence is down, unemployment is up, and people are not purchasing goods other than necessary goods. When durable goods are increased, it is a sign of a flourishing economy which is reflected by a high GDP. Durable goods follow the economic cycle in that when durable goods are up, real GDP is up and vice versa. Durable goods actually leads to an increased GDP so the two are directly correlated. Nondurable Goods vs. Real GDP – The graph implies that nondurable goods, while they follow the trend of real GDP, they do not react as drastically as the peaks and dips of real GDP. This indicates the need for nondurable goods. Even during times of recession, people may not spend as much on things such as groceries but they still need to purchase them to live. Therefore, during time of recession, you will see a decline of nondurable goods but not as drastically as a decline in real GDP. Services vs. Real GDP – This portion of consumption is least affected by economic events that would affect real GDP. While real GDP takes drastic peaks and falls throughout the life of the graph, services remain fairly steady. This is due to the fact that services are not necessarily luxury items but are usually necessary for daily living. Additionally, services can be long term commitments and not as easily abandoned or switched for alternatives. Conclusion – Durable goods are most drastically affected by economic changes (most volatile) although it does drastically drop as the recession hits in 2008. We expect to see this trend as durable goods have the most alternatives while services are limited and usually more long-term. Essentially all three indicators make up consumption. It is evident that consumption is going to be affected by how the economy is doing. If we are in an economic recession, we expect consumption to decline. It will never fully get to the point of zero consumption as there are basic necessities, but certain indicators are more affected by economic conditions than others as shown in the graph. These patterns are important for firms because the indicators show the level of consumer confidence. It tells firms if they should promote growth in production and labor force versus a time of recession when firms may downsize. Economic conditions also imply what people will be buying. For example, during times of recession, women tend to purchase more beauty products (durable goods). To a firm, this is a determinate of what consumers will be purchasing during certain economic times.
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Running head: CONSUMPTION BEHAVIOR

1

Consumption Behavior
Institutional Affiliation
Name
Date

CONSUMPTION BEHAVIOR

2

Durable Goods vs. Real GDP
In observations made from 1999, durable goods seemed to be correlated directly with real
GDP. In this case, an increase in GDP was also reflected in an increase in durable goods and vice
versa, an indication that durable goods can be used as an indicator as a direct reflection of the
performance of the economy. During times of hard economic times, there are fewer purchases of
durable goods, a trend that was evident in the 2008 recession following a huge drop in real GDP
and also durable goods.
During the period, there was a drop in consumer confidence, the unemployment rate went
up, and people were generally not buying non-essential goods. However, with an increase in
durable goods, it signals a performing economy, a reflection of seen through a high GDP.
Therefore, durable goods tend to follow the prevailing economic cycle such that if durable goods
go up, then real GDP is on the rise and vice versa. This is because durable goods are actually the
ones that lead to increases in GDP and the two are therefore correlated directly.
Nondurable Goods vs. Real GDP
On the other hand, graphical representations indicate that as much as nondurable goods will
follow a similar trend to that of real GDP, their reaction is not as drastic as the real GDP peaks
and dips. This is an indicator of the necessity of nondurable goods. Therefore, people may not
spend a lot on nondurable goods such as groceries during a recession, but they will all the same
spend on them for survival. This is why during such times there will be a decline in the purchase
of nondurable goods though not as drastic as it would be to correspond with a real GDP decline.
Services vs. Real GDP
This is the least part of consumption that is affected by economic event...


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