Custom «GDP Trends Past Three Years» Essay Paper Sample

GDP Trends Past Three Years

The gross domestic product is a measure of the total transactions of a country. In United States it is featured in the National income and product accounts NIPAS which are produced by the Bureau of Economic Analysis which give information on the value and composition of the total national production. In measuring GDP, other components, such as consumer spending and fixed investment, record final sales in the current period, but these sales may involve goods that were produced, or at least partly produced, in earlier periods. The GDP is one of the most significant economic indicators and is closely watched by economists, policymakers and investment analysts.

As a result it is used by the white house to come up with the federal budget as well as the Federal Reserve policymakers. Investment analyst also uses GDP as an indicator of economic activity in an economy. In the business arena forecasts are prepared in line with the GDP projections. Though it is widely used GDP does not comprehensively state the status of the population since it is just a summary account. Other measures are used to show the detailed information of the well being if need be .this include but not limited to corporate profits, government spending , personal income and personal consumption all this are included in the national income and product accounts NIPAs.

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Real gross domestic product is more indicative since GDP is constituted of goods and services produced for the market and even non-market goods and services such as services offered by the department of defense, and educational services provided by state governments, health services provided by nonprofit organizations and emergency housing schemes during disasters. .in the last quarter of 2010 real GDP increased 2.8 percent this acceleration could have been as a result of increase in consumer spending, increase in exports while imports reduced and the upturn in residential fixed investments as well as the fall in government spending. Energy prices and food were the rise all through 2009 and 2010 reaching 2.1 percent in the last quarter of 2010. Excluding this two the gross domestic purchases further rose by 1.2 percent from 0.4 percent. In the same quarter the disposable personal income DPI rose to 1.4 percent.

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Consumer spending hit a high of 4.1 percent in the last quarter of 2010 since the first quarter of 2006. This acceralation was as result in consumption on durable and non durable goods. The second estimate of the fourth-quarter increase in real GDP is 0.4-percentage point less than the advance estimate, this can be observed from fig.1.primarily reflecting an upward revision to imports and downward revisions to state and local government spending and to consumer spending that was partly offset by an upward revision to exports. The average revision without regard to sign between the advance estimate and the second estimate is 0.5 percentage point. The downward modification to consumer spending was to both services and goods. The largest contributors to the revision were electricity and gas services, recreational goods and vehicles, and food services and accommodations. The increasing revision to exports was more than accounted for by exports of goods. In exports of goods, the largest contributors to the revision were other nonautomotive capital goods and civilian aircraft, engines, and parts. The upward revision to imports was to imports of goods. In imports of goods, the largest contributor to the revision was other imports of goods.

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The downward revision to state and local government spending was primarily to gross investment for structures. Source Data for the Second Estimates the upturn of exports significantly impacted on the GDP contributing 1.18 percentage points to real GDP. Due to the fall in the petroleum and related products volumes there was a decrease in import value. Both the local and the federal governments cut down their expenditure which also was a key driver of GDP. Some productive activities are not included in the GDP due to their complexity or unaccountability such as illegal trades, volunteer work or even care for one's own children. It should be noted that GDP is a measure of the current production of the country and not the total sales. NIPAs measures are indicative of the output and not when the goods or services are sold regardless whether they are produced for consumption.

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Natural resources and mining were a significant contributor to growth in 2009 this was due to a fall in prices for petroleum and related products this led to rise to the contribution of the  industry to more than ten percent in some regions. A downturn in professional and business heavily impacted the GDP in the overall and specific to some regions by up to two percent. The construction industry on its way to recovery stagnated over two quarters in 2009 and declining in the other two.

Consumer price index

Consumer price index (CPI) is basically a measure of the average fluctuations in prices of goods and services frequently consumed by households. There are two main population groups for accounting of the CPI. The first is the CPI for Urban Wage Earners and Clerical Workers (CPI-W) this group covers almost a third of the total population since it is composed of the clerical workers and wage earners. Secondly, there is the chained CPI for all urban consumers (C-CPI-U) this group covers approximately 86 percent of the total population since apart from the wage earners and clerical workers it incorporates managerial, technicians and other professionals as well as self-employed, contractual and retirees.

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CPIs are based on the most commonly consumed goods and services in this households this include food, shelter, energy, means of transport and basic medical services. A systematic method of collecting these prices across the country is applied. This is done in 87 different urban areas in about 26,000 retail outlets, supermarkets, hospitals, clinics and filling stations. Taxes accrued to the specific goods and services are also included in the index. A weighted average of the price changes is used to compute the index taking into account locations and the significance of items to the specific population. Separate indexes can be determined for CPI-U and CPI-W for various different regions or cities for primary use.

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The reference base for the C-CPI-U is December 1999 equals 100 however, that for CPI-U and CPI-W are 1982-1984 equals 100. This means a current cost of $ 625.897 for hospital and related services was 100 in the respective base year. Seasonal adjustments are made to enable analysts to have a better data to manipulate not seasonally adjusted data is used in the aggregation of the other crucial measures. The X-12-ARIMA seasonal adjustment method is used to compute seasonally adjusted indexes. These seasonally adjusted indexes get rid of the fluctuations that occur concurrently with each other such as price changes as a result of climatic conditions, demand, national disasters and production cycles.

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The CPI-U increased 2.1 percent in the last quarter of 2010 to an index level of 221.309 and for the fast month of 2011 the index rose by 0.7 percent. For the CPI-W, there was a rise by 2.3 percent over the last one year          to a level of 214.577 whereas the C-CPI-U increased 2.0 percent in the past one year.


The year 2011 started with an unemployment rate of 8.8 percent with the number of unemployed persons being 13.5 million this is a decline by at least 1 percent from the last quarter of 2010.  By group the blacks seemed to maintain the top of the most unemployed population with a rate of 15.5 percent. Hispanics had a percentage of 11.3; Asians rate was at 7.1 percent and white at 7.9 percent. The jobless rate among the adult women was 7.7 percent, adult men were 8.6 percent and amongst teenagers it was 24.5 percent. This data was not seasonally adjusted. The number of long term unemployed increased from 43.9 to 45.5 over the last month.

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An upturn in interest rates over a certain period may increase personal interest income this happened in the last quarter of 2010 when the shift of interest rates led to the increase of PII by $11.8 billion. Earlier in 2009, the deep in interest rates heavily affected the property rates, contract values as well as income from rent and dividends. This was as a result of the market trying to adjust to lower short term interest rates and the long term interest rates rose while the dollar depreciated in value. In the fourth quarter of 2008, there was a fall in the short-term interest rates this had an effect on GDP since personal interest income decreased $ 42.9 billion.

The last quarter of 2010 saw some regions, which had a strong housing market in the past hit by the decline far much later than the metropolitan areas Las Vegas being most hit. This price deflation and collapse of the housing market led to a fall on the residential fixed investment. In the second quarter of 2008, the housing market sales were down to the early 90s recession levels after the residential fixed investment index fell for the tenth consecutive quarter. In 2009 the hard hit housing market adversely affected the construction sector, finance and insurance sector as well. Since owner occupied housing drastically reduced over the past three years and it is an imputation in the GDP an impact was felt.

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