Gross Domestic Product in the USA

Introduction

Gross domestic product is the overall market value of all final goods and services, which the country has produced in one year. The gross domestic value is also taken as the sum of all the consumption, private investments, amount spent by the government, and all the country’s exports but the imports are excluded. GDP values are presented quarterly. The United States gross domestic product history has averaged between 2.5 – 3% each year but with some deviations. The GDP numbers are always presented in both current and constant dollars, whereby the current dollar makes use of today’s dollar and constant dollar GDP helps by converting the current value into standard era dollar. This essay paper will be focusing deeply on the different economic activities which have been causing changes in GDP values of four different periods (BEA, 2008)

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Decreasing real GDP 1929 – 1934

The GDP value in the period 1929 – 1934 was decreasing. In the year 1929, the gross domestic product value was 977.0 with personal consumption of 736.6, private investment of 101.7, and government expenditures of 146.5. The gross domestic product decreased in the year 1930 to 892.8 due to the reduced private investment which was 67.9. In the year 1931, the gross domestic product value decreased further to 834.9 this was due to further decrement of the private investments which was recorded as 42.6, though the change was controlled by the increased government consumption which was 168.2 (BEA, 2008).

The GDP in the year 1932 was recorded as 725.8 which was a result of several changes in all three major components. All the total values in each component were decreased. In the year 1933, the GDP value decreased further to 716.4 which was caused by decreased personal expenditures which were recorded as 601.1 though the great change was controlled by a relative increment of domestic investment which was 18.9 compared to 12.9 of the previous year. The GDP of the year 1934 was 794.4 an increment compared to the preceding two years. This was caused by changes in all three major components whereby there was an increment of all total values of all components. Personal consumption was at 644.0, private investment 34.2, and government expenditures at 177.3.

Increasing GDP 1938 – 1944

During the period between 1938 and 1944, the real gross domestic expenditure was increasing. In the year 1938, the GDP was 992.6 with personal expenditures of 768.2, private investment of 67.1, and government expenditures of 219.3. in 1939 the GDP increased to 1072.8 which was caused by the increments in all major components. In 1940 the GDP increased to 1166.9 as a result of positive changes in all major components. In 1941 the GDP further increased to 1366.1 as a result of a major positive change in government expenditure which increased from 245.3 in the previous year to 407.7. In 1942 the GDP increased greatly to 1618.2(BEA, 2008).

In this year both personal expenditures and private investments reduced greatly but a negative change was controlled by a great positive change in the government consumption which increased from 407.7 of the previous year to 959.4. In 1943 the GDP increased to 1883.1 as a result of increased personal expenditures and government expenditures which saved the situation due to its great increment of 1427 from 959.4 of the previous year. In 1944, the GDP increased to 2035.2 as a result of positive changes in all major components where they all increased. Personal consumption was 943.0, private investment was 56.5, and government expenditures were 1606.1.

Increasing GDP 1995 – 1999

During the period between 1995 – 1999, the real GDP was increasing. In the 1st quarter of 1995, the GDP was 9025.3, with private investment of 1282.1, personal consumption of 6004.3, and government expenditures of 1891.6. In the second quarter of 1995, the GDP increased by 0.9% due to the positive change in personal consumption which increased from 0.5% to 3.3%. In the third quarter of the year, 1995 GDP increased by 3.4% due to continual increment of personal consumption which changed by 3.6%. In the final quarter in 1995 GDP increased by 2.8%, private investment controlled the trend as it had a great change of 11.7%. In the year 1996, the GDP of the first quarter was 9247.2, with personal consumption of 6206.9, private investment of 1287.1, and government spending of 18845.0 (BEA, 2007).

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The second-quarter GDP increased by 7.1% as a result of major changes in private investment and government consumption of 22.4% and 5.9% respectively. In the third quarter, GDP increased by 3.5% although the government spending moved on the opposite side by -0.4% change of private investment by 21.8% maintained a positive trend of GDP. In the final quarter GDP changed by 4.4%, private investment moved the opposite direction of GDP by -1.1%& and the government spending increased by 3.4% which was the cause of the positive change of GDP.

In the year 1997, the real GDP was 9666.2, with personal consumption of 6430.2, domestic investment of 1451.3, and government expenditures of 1929.4. During the second quarter, the real GDP increased by 6.1%, this increment was caused by the changes in private investment which increased by 28.1%. During the third quarter, the real GDP increased by 5.1% as a result of changes in personal consumption which moved from 1.6 to 7.0%. The fourth-quarter GDP increased by 3.1% as a result of changes in government expenditures which caused an increment from 0.4 to 0.7%. in the first quarter of the year 1998, the real GDP increased by 3.8% this increment was caused by changes in private investments which increased from 6.5 to 20.5% although government spending moved towards the opposite direction of the GDP by -2.4%. during the second quarter real GDP increased by 3.6% which was as a result of changes in personal consumption which increased from 4.0 to 7.1% and government spending which increased from -2.4 to 9.0%. The two components caused a positive trend as private investments moved towards the opposite direction by -4.7% (BEA, 2007).

In the third quarter real GDP increased by 5.4% due to changes in private investments which increased from -4.7% to 12.0%. during the final quarter, the real GDP increased by 7.1% due to changes in personal consumption which changed from 5.4 to 6.3%, and private investments which increased from 12.0 to 13.5%. In the first quarter of the year 1999, the real GDP increased by 3.6% due to the changes in personal consumption, which increased by 4.0% compared to the previous period when it had increased by 6.3%. during the second quarter, the real GDP increased by 3.2% due to changes in personal consumption which changed from 4.0 to 6.4% private investments moved towards the opposite direction by -1.4%. During the third quarter, the real GDP increased by 5.2% due to changes in private investments which changed from -1.4% to 10.4%, and in government expenditures which changed from 1.7 to 5.3%. in the final quarter, real GDP increased by 7.4% due to changes in private investments which changed from 10.4% to 15.0%, and in government spending which changed from 5.3% to 6.5%.

Stagnating growth of and declining real GDP 2007- 2009

In the first quarter of the year 2007, GDP was 13099.9, with private investments of 2132.6, and government spending of 2409.5. In the second quarter real GDP increased by 3.2% due to a great change in private investments which increased from -6.0 to 5.7%. The third-quarter GDP increased by 3.6% due to some changes in personal consumption. The final quarter increased by only 2.1% because private investments moved in the opposite direction by -7.7%. In the first quarter of 2008, GDP started decreasing with -0.7% apart from government expenditures which increased by 2.6%. the second quarter, GDP increased slightly by 1.5% due to changes in personal consumption and government spending which also increased slightly and a great drawback of private investment of -10.4%. in the third quarter GDP declined further by -2.7%, all the major components declined apart from government spending which increased by 4.8% (BEA, 2007)

The final quarter GDP decreased completely by -5.4%, only government spending which increased by 1.2%. In the first quarter of 2009, GDP declined by -6.4%, with a great drawback of private investment of -50.5% only personal consumption which increased by 0.6%. In the second quarter, GDP declined slightly by -0.7%, with only government spending increasing by 6.7%. In the third quarter, GDP increased by 2.2% due to a great change in private investment which increased from -23.7% to 5.0%. The final quarter increased by 5.7% due to a great change in private investment which further increased from 5.0% to 39.3%, but the government spending moved in the opposite direction.

Conclusion

In conclusion, the total output of personal consumption, private investment, and government spending are equally factors that affect the country’s GDP. These major components’ effects make up for each other, when one has a decreased output; the rest can be increased thus having no effects on the GDP. Each sector must play to ensure the GDP remains high.

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Works Cited

Bureau of Economic Analysis (BEA). National Economic Accounts. Bureau of Economic Analysis, 2007. Web.

Bureau of Economic Analysis (BEA). National Economic Accounts. Bureau of Economic Analysis, 2008. Web.

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