Economics Cpi Essay

1058 WordsNov 15, 20105 Pages
Question 1 In table 7 of the Gross Domestic Product Release, from the U.S. Bureau of Economic Analysis website, it shows the percentage change in real GDP from 1994 through 2009. This data shows how much personal consumption, private domestic investment, government spending and net exports changes year by year. We can also relate this data to the economic business cycle. The business cycle is a sequence of economic activity with alternating periods of economic growth. When the U.S. GDP goes up from year to year that doesn’t necessarily mean every component of GDP rises, there are many different possibilities that GDP can experience with the fluctuation of a recession period or a recovery period. For example, look at table 7 between the years 1994 through 1997, in between these years GDP experienced a recession period followed by a couple years of recovery. In this time frame GDP went from a percentage change from the following year in 1994 of 4.1 to 2.5 in 1995. In this period a recession occurred, every component of GDP decreased besides government spending and exports. This period was then followed by the recovery periods where GDP rose from 2.5 to 3.7 in 1996 and then to 4.5 in 1997. In this time every component of GDP rose expect exports which hit its economic trough of 8.3 of that 4 year period in 1996 but once again recovered in 1997. Another example in table 7 we can look at to relate GDP’s behavior with the businesses cycle is from 1999 to 2002. In this time there was a pretty substantial recession period followed by small recovery period. In this time GDP hit an economic peak in 1999, and you know what that means, what goes up must come down. This was then followed by a recession; GDP went from 4.8 in 1999 to 4.1 the following year then dropping off to 1.1 percentage change in 2001. Almost all components of GDP again dropped

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