can you tell me about the current status of the u.s.economy and its impact on labor.?

Question

also can you make it to be like a 2-3page report

Answer 1

A stable U.S. economy relies on indicators such as consumer spending, unemployment, product development, tax cuts and energy costs. When in flux, these factors shift the nation's economic status. What sustains a steady economy? What happens when our country's economic base is not solid? After reading Federal Reserve Chairman Alan Greenspan's predictions, students can also predict what could happen over the next six months if America does not revisit its fiscal policies based on the financial conditions that influence them.

Curriculum connections: Economics, government, mathematics

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Introduction to economics teaching
Marketing microeconomics
Balancing Keynesian and classical ideas
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Objectives

Students will be able to:

# Explain the factors that influence the U.S. economy and their present status after reading the CNNfyi.com article "Fed could cut again."

# Research and chart data that lead to predictions about our nation's economic status by creating a graph.

# Predict the status of the U.S. economy over the next six months by creating and presenting a financial report in the role of Alan Greenspan.

Standards

High School (Grades 9-12)

Mid Continent Research for Education and Learning (McREL)

Economics Standard 8: Students understand basic concepts of United States fiscal policy and monetary policy; that changes in the money supply lead to changes in interest rates and in individual and corporate spending which may influence the levels of spending, employment, prices, and economic growth in the economy; and that fiscal policies take time to affect the economy and that they may be reinforced or offset by monetary policies and changes in private investment spending by businesses and individuals.

Mathematics Standard 6: Students understand and apply basic and advanced concepts of statistics and data analysis. They select and use the best method of representing and describing a set of data (i.e., scatter plot, line graph, two-way table).

Suggested time

Article and questions only: 30 minutes

Full lesson plan: Two to three classroom periods

Procedures

1. Ask students to brainstorm a list of factors that critically affect the U.S. economy. Chart their responses and then ask them to categorize the factors under headings, such as consumer spending, unemployment, energy costs, stock market, etc. Explain that recent fluctuations across financial sectors have had an impact on the country's economic status. Provide background on recent decisions -- and their causes -- regarding federal interest rates and financial trends.

2. Direct students to read the CNNfyi.com article "Fed could cut interest rates again" and then respond to and discuss the following questions:

* Who is Alan Greenspan? How does he view the current status of the U.S. economy? What has he recommended the federal government do to avoid recession?

* What are interest rates? What impact could a reduction in interest rates have on the economy? What happens to the economy when interest rates are higher?

* What factors affect the nation's current economic activity? How will these factors influence the economy as the year progresses?

* While Greenspan is considering reducing interest rates, what circumstances seem to contradict the need for this reduction? What is the role of business in the current economy? How has the economy affected your family's or your finances and spending?

3. Ask students to return to the list they created in Step 1 and add other categories highlighted in the article. Divide the class into enough groups representing each of the selected categories. Direct students to Internet and print resources providing statistical data on their respective categories. (Students can research these, but because of the topic's complexity, teacher guidance is recommended to jump start the task.)

4. Have students create graphs (line, pie, bar, etc.) that document changes in their categories over the last year to the present. Photocopy each group's completed graph so that each group can have a copy. Create a packet of graphs students will put into a three-ring binder or manila folder.

Assessment

Each group reviews the graph collection to analyze and synthesize data in order to determine the status of the U.S. economy over the next six months. Modeling Alan Greenspan's twice-yearly economic report (have students read examples), students create similar group reports to predict how the economy will fare over the next six months, and make recommendations on how to sustain and or strengthen it. A group representative, in the role of Alan Greenspan, presents predictions and recommendations to the class.

Accommodations

Students can compile statistics from 1990-2001 on one factor that influences America's economy, such as consumer spending, labor, Gross Domestic Product, inflation, etc. They can then create accompanying line or bar graphs that document the fluctuating selected factor's rates.

Challenge

The status of the U.S. economy has both domestic and international implications. Conduct research to determine the economic relationship between other countries and America and how these partnerships support or weaken financial structures and processes. What happens overseas when America's economy is struggling? Or when other nations are experiencing economic obstacles? What factors are most affected by domestic and international economic downfall? What domestic and international circumstances contribute to this downfall?

Did you ever wish you could get a quick, concise overview of the current status of the U.S. economy? If so, the Bureau of Economic Analysis (BEA) has a Website you just have to see.

The BEA's "Enhanced Overview of the U.S. Economy" provides a summary of the Nation’s economy with easy to read highlights and graphs of major economic statistics, making them more accessible to even casual data users.

The overview also includes news releases and articles that summarize gross domestic product, personal income, balance of payments and other economic indicators. Using color-coding, the new format makes data tables more accessible than before and provides easier downloading and printing from the Website.

Each of BEA’s four accounts — national, industry, international and regional — are presented on the page and feature links to more detailed information about the key economic indicators that BEA produces.

Highlights provide a synopsis for every economic indicator, creating a one-stop reference for data users looking for quick, accurate information.

"BEA is working hard to improve America’s access to economic data," said BEA Deputy Director Rosemary Marcuss, in a BEA press release "These data play an important role in helping the Nation chart its economic course."

BEA is an agency of the U.S. Department of Commerce. To present a better understanding of U.S. economic activity, it provides timely, relevant, and accurate economic data. BEA produces economic statistics that enable government and business decision-makers, researchers, and the American public to follow and understand the performance of the Nation's economy.
On most dimensions the U.S. economy appears to be performing well. Output growth has returned to healthy levels, the labor market is firming, and inflation appears to be well controlled. However, one aspect of U.S. economic performance still evokes concern among economists and policymakers: the nation's large and growing current account deficit. In 2004, the U.S. external deficit stood at $666 billion, or about 5-3/4 percent of the U.S. gross domestic product (GDP). Corresponding to that deficit, U.S. citizens, businesses, and governments on net had to raise $666 billion on international capital markets.1 The current account deficit has been on a steep upward trajectory in recent years, rising from a relatively modest $120 billion (1.5 percent of GDP) in 1996 to $414 billion (4.2 percent of GDP) in 2000 on its way to its current level. Most forecasters expect the nation's current account imbalance to decline slowly at best, implying a continued need for foreign credit and a concomitant decline in the U.S. net foreign asset position.

Why is the United States, with the world's largest economy, borrowing heavily on international capital markets--rather than lending, as would seem more natural? What implications do the U.S. current account deficit and our consequent reliance on foreign credit have for economic performance in the United States and in our trading partners? What policies, if any, should be used to address this situation? In my remarks today I will offer some tentative answers to these questions. My answers will be somewhat unconventional in that I will take issue with the common view that the recent deterioration in the U.S. current account primarily reflects economic policies and other economic developments within the United States itself. Although domestic developments have certainly played a role, I will argue that a satisfying explanation of the recent upward climb of the U.S. current account deficit requires a global perspective that more fully takes into account events outside the United States. To be more specific, I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving--a global saving glut--which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today. The prospect of dramatic increases in the ratio of retirees to workers in a number of major industrial economies is one important reason for the high level of global saving. However, as I will discuss, an important source of the global saving glut has been a remarkable reversal in the flows of credit to developing and emerging-market economies, a shift that has transformed those economies from borrowers on international capital markets to large net lenders.

To be clear, in locating the principal causes of the U.S. current account deficit outside the country's borders, I am not making a value judgment about the behavior of either U.S. or foreign residents or their governments. Rather, I believe that understanding the influence of global factors on the U.S. current account deficit is essential for understanding the effects of the deficit and for devising policies to address it. Of course, as always, the views I express today are not necessarily shared by my colleagues at the Federal Reserve.2

The U.S. Current Account Deficit: Two Perspectives
We will find it helpful to consider, as background for the analysis of the U.S. current account deficit, two alternative ways of thinking about the phenomenon--one that relates the deficit to the patterns of U.S. trade and a second that focuses on saving, investment, and international financial flows. Although these two ways of viewing the current account derive from accounting identities and thus are ultimately two sides of the same coin, each provides a useful lens for examining the issue.

The first perspective on the current account focuses on patterns of international trade. You are probably aware that the United States has been experiencing a substantial trade imbalance in recent years, with U.S. imports of goods and services from abroad outstripping U.S. exports to other countries by a wide margin. According to preliminary data, in 2004 the United States imported $1.76 trillion worth of goods and services while exporting goods and services valued at only $1.15 trillion. Reflecting this imbalance in trade, current payments from U.S. residents to foreigners (consisting primarily of our spending on imports, but also including certain other types of payments, such as remittances, interest, and dividends) greatly exceed the analogous payments that U.S. residents receive from abroad. By definition, this excess of U.S. payments to foreigners over payments received in a given period equals the U.S. current account deficit, which, as I have already noted, was $666 billion in 2004--close to the $617 billion by which the value of U.S. imports exceeded that of exports.

When U.S. receipts from its sales of exports and other current payments are insufficient to cover the cost of U.S. imports and other payments to foreigners, U.S. households, firms, and governments on net must borrow the difference on international capital markets.3 Thus, essentially by definition, in each period U.S. net foreign borrowing equals the U.S. current account deficit, which in turn is closely linked to the imbalance in U.S. international trade.

That the nation's imports currently far exceed its exports is both widely understood and of concern to many Americans, particularly those whose livelihoods depend on the viability of exporting and import-competing industries. The extensive attention paid to the trade imbalance in the media and elsewhere has tempted some observers to ascribe the growing current account deficit to factors such as changes in the quality or composition of U.S. and foreign-made products, changes in trade policy, or unfair foreign competition. However, I believe--and I suspect that most economists would agree--that specific trade-related factors cannot explain either the magnitude of the U.S. current account imbalance or its recent sharp rise. Rather, the U.S. trade balance is the tail of the dog; for the most part, it has been passively determined by foreign and domestic incomes, asset prices, interest rates, and exchange rates, which are themselves in turn the products of more fundamental driving forces. Instead, an alternative perspective on the current account appears likely to be more useful for explaining recent developments. This second perspective focuses on international financial flows and the basic fact that a country's saving and investment need not be equal in each period.

In the United States, as in all countries, economic growth requires investment in new capital goods and the upgrading and replacement of older capital. Examples of capital investment include the construction of factories and office buildings and firms' acquisition of new equipment, ranging from drill presses to computers to airplanes. Residential construction--the building of new homes and apartment buildings--is also counted as part of capital investment.4

All investment in new capital goods must be financed in some manner. In a closed economy without trade or international capital flows, the funding for investment would be provided entirely by the country's national saving. By definition, national saving is the sum of saving done by households (for example, through contributions to employer-sponsored 401(k) accounts) and saving done by businesses (in the form of retained earnings) less any budget deficit run by the government (which is a use rather than a source of saving).5

As I say, in a closed economy investment would equal national saving in each period; but, in fact, virtually all economies today are open economies, and well-developed international capital markets allow savers to lend to those who wish to make capital investments in any country, not just their own. Because saving can cross international borders, a country's domestic investment in new capital and its domestic saving need not be equal in each period. If a country's saving exceeds its investment during a particular year, the difference represents excess saving that can be lent on international capital markets. By the same token, if a country's saving is less than the amount required to finance domestic investment, the country can close the gap by borrowing from abroad. In the United States, national saving is currently quite low and falls considerably short of U.S. capital investment. Of necessity, this shortfall is made up by net foreign borrowing--essentially, by making use of foreigners' saving to finance part of domestic investment. We saw earlier that the current account deficit equals the net amount that the United States borrows abroad in each period, and I have just shown that U.S. net foreign borrowing equals the excess of U.S. capital investment over U.S. national saving. It follows that the country's current account deficit equals the excess of its investment over its saving.

To summarize, I have described two equivalent ways of interpreting the current account deficit, one in terms of trade flows and related payments and one in terms of investment and national saving. In general, the perspective one takes depends on the particular analysis at hand.

As I have already suggested, most economists who have offered explanations of the high and rising level of the U.S. current account deficit and the country's foreign borrowing have emphasized investment-saving behavior rather than trade-related factors (and I will do the same today). Along these lines, one commonly hears that the U.S. current account deficit is the product of a precipitous decline in the U.S. national saving rate, which in recent years has fallen to a level that is far from adequate to fund domestic investment. For example, in 1985 U.S. gross national saving was 18 percent of GDP, and in 1995 it was 16 percent of GDP; in 2004, by contrast, U.S. national saving was less than 14 percent of GDP. Those who emphasize the role of low U.S. saving often go on to conclude that, for the most part, the U.S. current account deficit is "made in the U.S.A." and is independent (to a first approximation) of developments in other parts of the globe.

That inadequate U.S. national saving is the source of the current account deficit must be true at some level; indeed, the statement is almost a tautology. However, linking current-account developments to the decline in saving begs the question of why U.S. saving has declined. In particular, although the decline in U.S. saving may reflect changes in household behavior or economic policy in the United States, it may also be in some part a reaction to events external to the United States--a hypothesis that I will propose and defend momentarily.

One popular argument for the "made in the U.S.A." explanation of declining national saving and the rising current account deficit focuses on the burgeoning U.S. federal budget deficit, which in 2004 drained more than $400 billion from the national saving pool. I will discuss the link between the budget deficit and the current account deficit in more detail later. Here I simply note that the so-called twin-deficits hypothesis, that government budget deficits cause current account deficits, does not account for the fact that the U.S. external deficit expanded by about $300 billion between 1996 and 2000, a period during which the federal budget was in surplus and projected to remain so. Nor, for that matter, does the twin-deficits hypothesis shed any light on why a number of major countries, including Germany and Japan, continue to run large current account surpluses despite government budget deficits that are similar in size (as a share of GDP) to that of the United States. It seems unlikely, therefore, that changes in the U.S. government budget position can entirely explain the behavior of the U.S. current account over the past decade.

The Changing Pattern of International Capital Flows and the Global Saving Glut
What then accounts for the rapid increase in the U.S. current account deficit? My own preferred explanation focuses on what I see as the emergence of a global saving glut in the past eight to ten years. This saving glut is the result of a number of developments. As I will discuss in more detail later, one well-understood source of the saving glut is the strong saving motive of rich countries with aging populations, which must make provision for an impending sharp increase in the number of retirees relative to the number of workers. With slowly growing or declining workforces, as well as high capital-labor ratios, many advanced economies outside the United States also face an apparent dearth of domestic investment opportunities. As a consequence of high desired saving and the low prospective returns to domestic investment, the mature industrial economies as a group seek to run current account surpluses and thus to lend abroad.6

Although strong saving motives on the part of many industrial economies contribute to the global saving glut, the saving behavior of these countries does not explain much of the increase in desired global saving in the past decade. Indeed, in a number of these countries--Japan is one example--household saving has declined recently. As we will see, a possibly more important source of the rise in the global supply of saving is the recent metamorphosis of the developing world from a net user to a net supplier of funds to international capital markets.

Table 1 provides a basis for a discussion of recent changes in global saving and financial flows by showing current account balances for different countries and regions, in billions of U.S. dollars, for the years 1996 (just before the U.S. current account deficit began to balloon), 2000, and 2004. I should note that these current account balances of necessity reflect realized patterns of investment and saving rather than changes in the rates of investment and saving desired from an ex ante perspective. Nevertheless, changes in the pattern of current account balances together with knowledge of changes in real interest rates should provide useful clues about shifts in the global supply of and demand for saving.

Answer 2

1

Answer 3

Jeez, make the lazy scrub write her own homework paper.