Macro economy and its important variables
Nominal GDP (inflation not adjusted) should not be confused with real GDP (inflation adjusted) as the increase in nominal GDP (merely increase in prices) doesnt mean that country has made more money during a certain period (Investopedia). Unemployment is equal to the number of people who could not get jobs among the total labour force available at a particular time. The inflation means the rate of increase in the prices of goods which is measured by the Consumer Price Index (CPI) and GDP deflator (a ratio of nominal and real GDP) (Investopedia). Some other important variables of macro economy are the interest rates, economic growth, budget deficit and poverty.
US Macroeconomic Scenario in 1990
United States economy is considered to be the greatest and most diversified economy of the world having a per capita Gross national Production (GNP) of more than 21,000 per annum. In 1989, the US has begun its eights year of continuous growth which is considered to be the longest period in peace times. This growth is the outcome of consistent improvements in the wages and employment opportunities. The unemployment rate was 5.2 at that time which was the lowest in the previous ten years and the inflation rate was the around 4.8 at that time. In 1990, the year I was born, the US economy entered into a period of recession. The major factors of that economic down turn were the significant increase in the oil prices because of the invasion of Iraq on Kuwait (Greene and Tishchishyna). There was also a quick increase in interest rates. This increase in the interest rates put negative impact on the availability of credit to the industry. These factors along with many others drag the national economy to recession. Because of this recessionary pressure, the output of the nation was decreased by 1.6 (Bureau of Economic Analysis). Due to the slowdown in the business activity, almost 1.7 million people were laid off (Bureau of Economic Analysis). Unemployment rose from 5.2 in 1989 to 7.5 in 1990 (Bureau of Economic Analysis). However, the economy has started to revive in the next year (1991) and this positive trend persisted in the next decade which is considered to be the third longest growth period after World War II. During this growth period, the real GDP kept on fluctuating between 2 and 3.5 till 1998.
US Macroeconomic Scenario in 2009
The CPI-U (i.e. Consumer Price Index-Urban) for the year 2009 was increased by 2.7 for all items as stated by the Bureau of Statistics. This increase is due to the rise in energy prices by 18.5 (Bureau of Economic Analysis). The unemployment rate was about 10 and the total unemployed personals were 15.3 million till December 2009 (Bureau of Economic Analysis). On average, the hourly earnings per person were 18.8 in the year 2009 (Bureau of Economic Analysis). The GDP rate has shrunk to 2.6 and its worth in dollars was about 14.204 trillion which was 22 of the worlds economy (Bureau of Economic Analysis). Per capita nominal GDP was 46,442 till December 2009. United States has witnessed the most wobbly situation in 2009 which is considered to be the most uncertain case during the last 70 years. Because of this uncertainty, government has experienced a negative trade balance, capital accounts deficits and balance of payments deficits as compared to the previous years. Main causes of this recession are the subprime mortgage loans, excessive derivative activity, real estate bubble and huge expanses on defence due to the war against terrorism. Though U.S. has injected a large chunk of money (700 billion as a bailout plan) to support the economy, yet it was considered insufficient by the experts (News). In January 2009 the United States congress approved a bill consist of an additional 787 billion fiscal stimulus of which two-thirds amount will be spent on additional spending and almost reaming money on tax reductions in order to create jobs and to assist the economic revival (Congress).
Comparison of US economy (1990 and 2009)
By comparing the economic snapshots of 1990 and 2009, it is clear that total buying power of Americans has increased from 4.3 trillion in 1990 to 11.1 trillion in 2009 (a total of 159 increase), while at the same time there was an increase of 66 in the inflation (Bureau of Economic Analysis). It means that on average there was an improvement of 93 in the real purchasing power of people. Average rate of growth in the purchasing power and inflation from 1990 to 2009 was 5.1 and 2.5 respectively (Bureau of Economic Analysis). It means that if a typical American earns 100 in 1990, he or she earns 105 in 2009 and the inflation adjusted income is 102.5. During these nineteen years, county has seen two mild recessionary periods and one longest growth period. The duration of the 1990 recession was 8 month and GDP of the country went down by 1.4, consumption by 0.7 and investment reduced by 3.2 (Bureau of Economic Analysis). But the recession of 2008 to 2009 is comparatively longer and deeper (Bureau of Economic Analysis). In 1990, a typical American has the nominal income equal to 28970 per annum, while the price of a new house at that time was 123,000 on average a new car can be bought in 16,000 and price per gallon of gas was 1.34 (The People History). The value of a 100 currency note has increased to 150 during the last nineteen years (The People History). Average retail price of electricity was 9.81 cents per kilowatt-hour in 2009.
Similarities and differences between 1990 and 2009
Although a lot of things have changed since I was born in 1990, there have been few similarities as well. For example, when I was born, there was war going on in the Middle East between US and its Allied Forces which are trying to force Iraq to bow down. Today in 2010 as well, we have war going on in different theatres of the world, which are being conducted to eliminate terrorism. Back in 1990s, the world was suffering from a surge of recession in market, and this phenomenon has repeated now as well. On the other hand, things which have changed dramatically since 1990 include increase in the overall purchasing power of an average American, the positive influence of e-commerce and the Internet everywhere. Many things have changed for the worse as well. If we look as unemployment rate, inflation, food prices and house prices, all these have either increase to make the life of a common man more difficult today.